<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13D-1(A) AND
AMENDMENTS THERETO FILED PURSUANT TO 13D-2(A)
(Amendment No. 3)/1/
UNITED VIDEO SATELLITE GROUP, INC.
________________________________________________________________________________
(Name of Issuer)
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
________________________________________________________________________________
(Title of Class of Securities)
913155107
_______________________________________________________________
(CUSIP Number)
STEPHEN M. BRETT, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
TELE-COMMUNICATIONS, INC.
5619 DTC PARKWAY
ENGLEWOOD, CO 80111
(303) 267-5500
________________________________________________________________________________
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
JUNE 10, 1998
_______________________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g) check the following box
[_].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
(continued on following page)
___________________________
/1/ The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act (however, see the Notes).
Page 1 of 15 pages
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SCHEDULE 13D PAGE 2 OF 2 TEMPLATE
===============================================================================
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP NO.913155107 PAGE 2 OF 6 PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
TELE-COMMUNICATIONS, INC.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP(See Instructions)
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (See Instructions)*
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
DELAWARE
- ------------------------------------------------------------------------------
SOLE VOTING POWER 26,892,054 SHARES*
7
NUMBER OF
SHARES -----------------------------------------------------------
SHARED VOTING POWER 0 SHARES
BENEFICIALLY 8
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER 26,892,054 SHARES*
9
REPORTING
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER 0 SHARES
WITH 10
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
26,892,054 SHARES
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
(see instructions)
12
[X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
73.1%
Assumes conversion of Class B Common Stock into Class A Common Stock.
Because each share of Class B Common Stock is generally entitled to
ten votes per share, the Reporting Person owns equity securities of
the Company representing approximately 93.3% of the voting power of
the Company (assuming no conversion of the Class B Common Stock).
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSONS (see instructions)
CO
- ------------------------------------------------------------------------------
* Excludes shares to be acquired pursuant to the Stock Purchase Agreement (as
defined herein) and shares beneficially held by directors and executive
officers of the Reporting Person.
Page 2 of 15 pages
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3 to
SCHEDULE 13D
Statement Of
TELE-COMMUNICATIONS, INC.
Pursuant to Section 13(d) of the
Securities Exchange Act of 1934
in respect of
UNITED VIDEO SATELLITE GROUP, INC.
This Report on Schedule 13D relates to the Class A Common Stock, par
value $.01 per share (the "Class A Common Stock"), of United Video Satellite
Group, Inc., a Delaware corporation (the "Company"), and includes information
regarding (i) the Class A Common Stock and (ii) the Class B Common Stock, par
value $.01 per share, of the Company (the "Class B Common Stock"). This Report
constitutes Amendment No. 3 to the TCI Schedule 13D; it amends and supplements
the Report on Schedule 13D originally filed by Tele-Communications, Inc., a
Delaware corporation ("TCI" or the "Reporting Person"), on February 2, 1996,
with the Securities and Exchange Commission ("SEC"), as amended and supplemented
by Amendment No.1 to the TCI Schedule 13D filed with the SEC on January 14,
1998, and as restated in its entirety by Amendment No. 2 to the TCI Schedule
13D filed with the SEC on July 13, 1998 (the "TCI Schedule 13D"). TCI, together
with parties referred to herein, have entered into the Letter Agreement (as
defined herein), pursuant to which they have agreed to, among other things,
enter into a stockholders' agreement (the "Stockholders' Agreement"), upon the
consummation of the transactions contemplated by the Letter Agreement. As a
result, TCI and such persons may constitute a "group" for purposes of Rule 13d-5
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
respect to their respective beneficial ownership of the shares of Class A Common
Stock. The filing of this Report shall not constitute an admission that TCI and
such persons [constitute a "group" for purposes of Rule 13d-5 promulgated under]
the Exchange Act.
The summary descriptions contained in this Report of certain
agreements and documents are qualified in their entirety by reference to the
complete texts of such agreements and documents filed as Exhibits hereto and
incorporated herein by reference.
Page 3 of 15 pages
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ITEM 2. IDENTITY AND BACKGROUND
Item 2 of the TCI Schedule 13D is hereby amended and supplemented by
adding the following information thereto:
The name, business address and present principal occupation or
employment and the name, address and principal business of any corporation or
other organization in which such employment is conducted, of each of the
executive officers and directors of TCI are set forth in Schedule 1 attached
hereto and incorporated herein by reference. TCI is not controlled by any other
person.
During the last five years, neither TCI nor, to the knowledge of TCI,
any of the persons set forth on Schedule 1 has (i) been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws. To the knowledge of TCI, each of its
executive officers and directors is a citizen of the United States, except as
specifically set forth in Schedule 1 hereto.
ITEM 4. PURPOSE OF TRANSACTION
Item 4 of the TCI Schedule 13D is hereby amended and supplemented by
adding the following information thereto:
The Company, TCI, News America Incorporated ("NAI"), a subsidiary of
The News Corporation Limited ("News Corp."), and News Corp. entered into an
Agreement dated June 10, 1998 (together with all Annexes and Schedules
thereto, the "Letter Agreement"). Pursuant to the Letter Agreement, subject to
the conditions set forth therein, NAI has agreed to: (A) sell to the Company
(i) all of the outstanding stock of News America Publications Inc.
("Publications") (which owns and publishes TV Guide magazine and to which, prior
to the closing of the transactions contemplated under the Letter Agreement, NAI
will cause the transfer, as a contribution to capital, of the assets of the
entertainment web site known as TVGEN (which includes an electronic program
guide) together with rights to such intellectual property owned by NAI or any of
its controlled affiliates as is used in the conduct of the TVGEN business) and
(ii) all of the outstanding stock of TVSM, Inc. (together with Publications,
the "NAI Contributed Entities") and (B) assign to the Company certain other
rights (the transactions described in clauses (A) and (B) are collectively
referred to herein as the "NAI Transaction"), all upon the terms and subject to
the conditions set
Page 4 of 15 pages
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forth in the Letter Agreement, in exchange for $800,000,000 in cash and
30,000,000 shares of the Company's common stock (11,251,706 shares of Class A
Common Stock and 18,748,294 shares of Class B Common Stock), subject to
adjustment as provided in the Letter Agreement. Pursuant to the Letter
Agreement, TCI has agreed to vote its shares of Class A Common Stock and Class B
Common Stock in favor of approval of the NAI Transaction at the meeting of the
Company's stockholders to be held to obtain such approval. Further, the Company,
TCI, NAI and News Corp. have agreed to enter into the Stockholders Agreement, as
described in Annex A to the Letter Agreement, which shall become effective upon
the closing of the NAI Transaction. Additionally, except as set forth in the
Letter Agreement, TCI and News Corp. have agreed that, until the closing of the
NAI Transaction, (i) the Company (in the case of TCI) and the NAI Contributed
Entities (in the case of News Corp.) will be the exclusive vehicles through
which TCI and News Corp. directly or indirectly through their subsidiaries or
controlled affiliates conduct guide businesses (print, electronic or otherwise),
whether within or outside the United States and (ii) neither TCI nor News Corp.
shall, directly or indirectly through subsidiaries or controlled affiliates,
invest in or acquire any guide business prior to the closing of the Transaction.
The Stockholders Agreement will provide for, among other things: (i)
TCI and News Corp. each having the right to designate four directors of the
Company (in each case representing 40% of the number of directors constituting
the entire Board of Directors of the Company (the "Company Board"), with such
eight director designees then selecting or nominating two directors who must
qualify as independent directors, subject to pro rata adjustment to reflect
sales or conversions of Class B Common Stock; (ii) except as set forth in the
Stockholders Agreement, the Company being the exclusive vehicle through which
TCI and News Corp. directly or indirectly through their respective subsidiaries
and controlled affiliates conduct guide businesses (print, electronic or
otherwise), whether within or outside the United States, so long as TCI, on the
one hand, and News Corp., on the other is entitled to designate at least one
director of the Company; (iii) certain transfer restrictions with respect to the
disposition by each of TCI and News Corp. of shares of Class A Common Stock and
Class B Common Stock or the conversion of shares of Class B Common Stock into
shares of Class A Common Stock, subject to the terms and conditions set forth in
the Stockholders Agreement; (iv) voting restrictions imposed upon each of TCI
and News Corp. such that TCI and News Corp. must mutually agree on any vote of
their shares of the Company's common stock or failing agreement each of TCI and
News Corp. must vote against any proposal so long as such party continues to own
a sufficient number of shares of Class B Common Stock such that it is entitled
to designate at least one director; (v) the affirmative vote of at least seven
of the ten directors being required to approve any action of the Company Board,
except for the removal of the Chief Executive Officer of the Company (the
"CEO"), which will require approval of six of the ten directors; and (vi) the
establishment of an Executive Committee of the Company Board, consisting of the
CEO, the President of the Company and one representative of each of TCI and NAI,
which committee shall take action, subject to a unanimous vote or consent of all
members of the Executive Committee, on behalf of the Company Board, based upon
the powers and duties delegated to it by the entire Company Board.
As a result of the voting power associated with the shares of the
Class B Common Stock and as the sole holder of Class B Common Stock, TCI may
currently be deemed to control the
Page 5 of 15 pages
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Company. Following the closing of the NAI Transaction, TCI and News Corp. may
be deemed to share control of the Company. However, neither TCI nor News Corp.
will have the ability to affirmatively direct management of the Company or the
Company's corporate transactions without the concurrence of the other. The
foregoing description in this Item 4 of the rights and obligations of the
parties to the Stockholders Agreement is qualified in its entirety by the terms
and conditions of the Letter Agreement, which is hereby incorporated herein by
reference.
In February 1998, Liberty Media Corporation, a Delaware corporation
("Liberty") and a wholly owned subsidiary of TCI, and the Company announced
their agreement in principle with respect to the sale by Liberty and the
purchase by the Company of all the capital stock of (i) Telluride Cablevision,
Inc., a Delaware corporation ("Telluride"), (ii) LMC Netlink Corporation, a
Colorado corporation ("LMC Netlink") and (iii) Westlink, Inc., a Colorado
corporation ("Westlink," and together with LMC Netlink, the "SNG Corporations"),
in consideration for the issuance to Liberty of 6,375,000 shares of common stock
of the Company. Telluride, LMC Netlink and Westlink are each general partners
of Netlink USA, a Colorado general partnership ("Netlink USA"). Netlink USA owns
an approximately 40% membership interest in Superstar/Netlink Group LLC, a
Delaware limited liability company ("SNG") and owns and operates certain other
assets and businesses, including the business of providing certain programming
services to certain satellite master antenna television operations (the "SMATV
Business") and the business of distributing on a wholesale basis, the signals of
the broadcast stations known as the "Denver 6" (the "Denver 6 Business"). The
Company owns an approximately 40% membership interest in SNG and has day-to-day
management control of SNG. The remaining approximately 20% membership interest
in SNG is owned by Turner Vision, Inc. ("Turner"). Subsequent to February 1988,
the Company, Liberty and Turner commenced negotiations with PRIMESTAR, Inc.
("Primestar") for the acquisition by a new holding company to be formed by
Primestar ("New Holdco") of beneficial ownership of 100% of the membership
interests in SNG, through a series of reverse triangular mergers of the SNG
Corporations, Turner and the subsidiary of the Company that owns its interest in
SNG (the "Primestar Transaction") in consideration for shares of Series A
Convertible Preferred Stock of New Holdco (the "Primestar Shares").
Thereafter, Liberty and the Company entered into a definitive Stock
Purchase Agreement (the "Stock Purchase Agreement") dated as of May 18, 1998,
which provided that (i) Liberty would cause Netlink USA to be restructured so
that the SNG Corporations would own 100% of Netlink USA (which would own only
the 40% interest in SNG and related assets and liabilities) and Telluride would
own the SMATV Business and Denver 6 Business, (ii) Liberty would sell to the
Company the stock of Telluride and, if the Primestar Transaction were
consummated, its share of the Primestar Shares, for 6,375,000 shares of Class B
Common Stock in the aggregate, or (iii) if the Primestar Transaction were not
consummated, Liberty would sell to the Company the stock of Telluride and the
SNG Corporations for 6,375,000 shares of Class B Common Stock (the "Netlink
Transaction").
Page 6 of 15 pages
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Consummation of the Netlink Transaction is subject to the conditions
set forth in the Stock Purchase Agreement, including, without limitation,
approval of such transactions by the requisite vote of the stockholders of the
Company at the 1998 Annual Meeting of the Stockholders of the Company. The
foregoing description in this Item 4 of the rights and obligations of the
parties to the Stock Purchase Agreement is qualified in its entirety by the
terms and conditions of the Stock Purchase Agreement, which is hereby
incorporated herein by reference.
The Letter Agreement provides that the closing of the NAI
Transaction shall occur, provided that all closing conditions set forth in the
Letter Agreement have been satisfied, on the same date as the closing of the
Netlink Transaction. It further provides, however, that if all conditions to
the NAI Closing other than the ability to close the Netlink Transaction have
been or can be satisfied on or before November 1, 1998, the closing of the NAI
Transaction shall occur on November 2, 1998.
Other than as described herein, TCI does not have any present plans or
proposals which relate to or would result in: (a) the acquisition by any person
of additional securities of the Company or the disposition of securities of the
Company; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries; (d) any change in the Board of Directors or management of the
Company, including any plans or proposals to change the number or terms of
directors or to fill any existing vacancies on the Board of Directors of the
Company; (e) any material change in the present capitalization or dividend
policy of the Company; (f) any other material change in the Company's business
or corporate structure; (g) changes in the Company's charter, by-laws or
instruments corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person; (h) a class of securities
of the Company being delisted from a national securities exchange or ceasing to
be authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (i) a class of equity securities of the Company
becoming eligible for termination of registration pursuant to Section 12(g)(4)
of the Exchange Act; or (j) any action similar to those enumerated above.
Notwithstanding anything contained herein, TCI reserves the right,
depending on all relevant factors, to change its intention with respect to any
and all of the matters referred to in the preceding paragraph.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Item 5 of the TCI Schedule 13D is hereby amended and restated in its
entirety by the following:
(a) TCI beneficially owns 26,892,054 shares of Class A Common Stock,
representing 73.1% of the shares of Class A Common Stock that would have been
outstanding on May 8, 1998, if all outstanding shares of Class B Common Stock
beneficially owned by TCI were converted by TCI into Class A Common Stock as of
such date. If TCI's shares of Class B Common Stock are not deemed to have been
converted, TCI beneficially owns 14,518,760 shares of Class A Common Stock,
representing 59.5% of the outstanding shares of Class A Common Stock. TCI
beneficially owns 12,373,294 shares of Class B Common Stock, representing 100%
of the
Page 7 of 15 pages
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outstanding shares of Class B Common Stock. If the 6,375,000 shares of Class B
Common Stock are issued to Liberty pursuant to the Netlink Transaction, TCI will
beneficially own 33,267,054 shares of Class A Common Stock, which represents
77.0% of the shares of Class A Common Stock that would have been outstanding on
May 8, 1998, if all outstanding shares of Class B Common Stock beneficially
owned by TCI were converted by TCI as of May 8, 1998. The foregoing amounts
exclude any shares of Class A Common Stock held by executive officers and
directors of TCI. TCI disclaims beneficial ownership of all shares held by such
officers and directors. Each share of Class B Common Stock is convertible at any
time at the option of the holder thereof into one share of Class A Common Stock.
Each share of Class A Common Stock has one vote, and each share of
Class B Common Stock has ten votes, on all matters presented to the holders of
such shares. The Class A Common Stock and Class B Common Stock vote together as
a single class for the election of directors and on all other matters to be
voted on by the stockholders of the Company, except as required by law. The
shares of Class A Common Stock and Class B Common Stock beneficially owned by
TCI (not counting the Class B Common Stock that will be issued to Liberty if the
Netlink Transaction is consummated) represent approximately 93.3% of the
combined voting power of the Class A Common Stock and the Class B Common Stock
voting together as a single class.
The foregoing percentages do not give effect to the issuance of shares
of Class A Common Stock and Class B Common Stock issuable upon the closing of
the NAI Transaction upon the terms and subject to the conditions set forth in
the Letter Agreement.
The aggregate number and percentage of shares of Class A Common Stock
beneficially owned by executive officers and directors of TCI are set forth on
Schedule 2 attached hereto and incorporated herein by reference.
(b) TCI has sole power to vote all 14,518,760 shares of Class A Common
Stock and all 12,373,294 shares of Class B Common Stock owned beneficially and
of record by TCI.
TCI has sole power to dispose of all 14,518,760 shares of Class A
Common Stock and all 12,373,294 shares of Class B Common Stock owned
beneficially and of record by TCI.
To the best knowledge of TCI each person listed on Schedule 2 has the
sole power to vote and dispose of all shares of Class A Common Stock
beneficially owned by such person.
(c) Except as described in Item 4, neither TCI nor, to the best
knowledge of TCI, any of the persons named on Schedule 1, has effected any
transaction in shares of Class A Common Stock or Class B Common Stock during the
past 60 days.
(d) No other person has the right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of, shares of the
Company's common stock owned beneficially and of record by TCI.
To the best knowledge of TCI no other person has the right to receive
or the power to direct the receipt of dividends from, or the proceeds from the
sale of, shares of the Class A Common Stock owned by any person listed on
Schedule 2.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIP WITH RESPECT
TO THE SECURITIES OF THE ISSUER
Item 6 of the TCI Schedule 13D is hereby amended and supplemented by
adding the following information thereto:
The information in Item 4 above is hereby incorporated by reference
herein.
Page 8 of 15 pages
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Item 7 of the TCI Schedule 13D is hereby amended and supplemented by
adding the following information thereto:
Exhibit No. Exhibit
10.1 Stock Purchase Agreement between the Company and Liberty dated
as of May 18, 1998.
10.2 Letter Agreement dated June 10, 1998 by and among the
Company, TCI, News Corp. and NAI (along with the Annexes,
including the Term Sheet, attached thereto).
[Signature on following page]
Page 9 of 15 pages
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information in this statement is true, complete
and correct.
Dated: July 13, 1998
TELE-COMMUNICATIONS, INC.
By: /s/ Stephen M. Brett
-------------------------------------
Name: Stephen M. Brett
Title: Executive Vice President and
General Counsel
Page 10 of 15 pages
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SCHEDULE 1
Directors, Executive Officers and Controlling Persons
of
Tele-Communications, Inc. ("TCI")
<TABLE>
<CAPTION>
DIRECTORS
---------
<S> <C> <C>
Principal Occupation & Principal Business or Organization in
Name Business Address which such Employment Is Conducted
- ---- ---------------------- -------------------------------------
Donne F. Fisher Consultant & Director of TCI; Cable television &
Business Executive telecommunications
5619 DTC Parkway & programming services
Englewood, CO 80111
John W. Gallivan Director of TCI; Director of Newspaper publishing
Kearns-Tribune Corporation
400 Tribune Building
Salt Lake City, UT 84111
Paul A. Gould Director of TCI; an Executive Vice Investment banking services
President and a Managing Director of
Allen & Company Incorporated
711 5/th/ Avenue
New York, New York 10022
Leo J. Hindery, Jr. President and Director of TCI Cable television &
5619 DTC Parkway telecommunications
Englewood, CO 80111 & programming services
Jerome H. Kern Vice Chairman of the Board Business Consulting; Law
and a Director of TCI;
Consultant; Special Counsel
to Baker & Botts, L.L.P.
5619 DTC Parkway
Englewood, CO 80111
</TABLE>
Page 11 of 15 pages
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<TABLE>
<CAPTION>
Principal Business or Organization
Principal Occupation & in Which such
Name Business Address Employment Is Conducted
- ----- ---------------------- ----------------------------------
<S> <C> <C>
Kim Magness Director of TCI; Business Executive Management of various business
4000 E. Belleview enterprises
Englewood, CO 80111
John C. Malone Chairman of the Board, Chief Executive Cable television &
Officer & Director of TCI telecommunications
5619 DTC Parkway & programming services
Englewood, CO 80111
Robert A. Naify Director of TCI; President & Chief Provider of services to the
Executive Officer of Todd-AO Corporation motion picture industry
172 Golden Gate Avenue
San Francisco, CA 94102
J C Sparkman Consultant & Director of TCI Cable television &
5619 DTC Parkway telecommunications
Englewood, CO 80111 & programming services
EXECUTIVE OFFICERS
------------------
Robert R. Bennett Executive Vice President of TCI Cable television &
5619 DTC Parkway telecommunications
Englewood, CO 80111 & programming services
Gary K. Bracken Executive Vice President & Controller Cable television &
of TCI Communications, Inc. telecommunications
5619 DTC Parkway & programming services
Englewood, CO 80111
Stephen M. Brett Executive Vice President, Secretary Cable television &
& General Counsel of TCI telecommunications
5619 DTC Parkway & programming services
Englewood, CO 80111
</TABLE>
Page 12 of 15 pages
<PAGE>
<TABLE>
Principal Occupation & Principal Business or Organization in
Name Business Address which such Employment is Conducted
---- ---------------------- -------------------------------------
<S> <C> <C>
Gary S. Howard Executive Vice President of TCI Cable television &
5619 DTC Parkway telecommunications
Englewood, CO 80111 & programming services
Marvin L. Jones Executive Vice President of TCI Cable television &
5619 DTC Parkway telecommunications
Englewood, CO 80111 & programming services
Ann M. Koets Executive Vice President of TCI Cable television &
Communications, Inc. telecommunications
5619 DTC Parkway & programming services
Englewood, CO 80111
Larry E. Romrell Executive Vice President of TCI Cable television &
5619 DTC Parkway telecommunications
Englewood, CO 80111 & programming services
Bernard W. Schotters, II Senior Vice President Cable television &
& Treasurer of TCI telecommunications
5619 DTC Parkway & programming services
Englewood, CO 80111
</TABLE>
Page 13 of 15 pages
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SCHEDULE 2
----------
Beneficial Ownership of the Company's
Class A Common Stock
by
Directors, Executive Officers and Controlling Persons
of
Tele-Communications, Inc. ("TCI")
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ---------------- ---------------------- ----------
Robert R. Bennett Options to purchase *
15,000 shares of Class A
Common Stock
Donne F. Fisher Options to purchase *
15,000 shares of Class A
Common Stock
Paul A. Gould Options to purchase *
15,000 shares of Class A
Common Stock
Leo J. Hindery, Jr. Options to purchase *
15,000 shares of Class A
Common Stock
Gary S. Howard Options to purchase *
100,000 shares of Class A
Common Stock
Larry E. Romrell Options to purchase *
15,000 shares of Class A
Common Stock
J.C. Sparkman Options to purchase *
15,000 shares of Class A
Common Stock
* Less than one percent
Page 14 of 15 pages
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
10.1 Stock Purchase Agreement between the Company and Liberty
dated as of May 18, 1998.
10.2 Letter Agreement dated June 10, 1998 by and among the
Company, TCI, News Corp. and NAI (along with the Annexes,
including the Term Sheet, attached thereto).
Page 15 of 15 pages
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
between
UNITED VIDEO SATELLITE GROUP, INC.
and
LIBERTY MEDIA CORPORATION
As of May 18, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS.................................................................... 1
AGREEMENT................................................................... 2
ARTICLE I
PURCHASE AND SALE
1.1 Sale of Stock......................................................... 2
1.2 Purchase of Stock..................................................... 3
1.3 Tax Treatment......................................................... 3
1.4 The Closing........................................................... 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Organization--Seller.................................................. 5
2.2 Corporate Power, Authorization and Validity of Agreement,
No Conflicts......................................................... 5
2.3 Shares................................................................ 5
2.4 Organization--Netlink Subsidiaries.................................... 6
2.5 Capitalization........................................................ 6
2.6 Subsidiaries.......................................................... 7
2.7 No Conflicts, Notices................................................. 7
2.8 Financial Statements.................................................. 8
2.9 Absence of Certain Changes............................................ 8
2.10 Liabilities........................................................... 10
2.11 Litigation............................................................ 10
2.12 Restrictions on Business Activities................................... 10
2.13 Tax Matters........................................................... 11
2.14 Contracts and Commitments............................................. 12
2.15 Adequacy of Assets; Intangible Property............................... 13
2.16 Licenses; Compliance with Regulatory Requirements..................... 14
2.17 Employee Benefit Plans................................................ 15
2.18 Employee Matters...................................................... 18
2.19 Interested Party Transactions......................................... 18
2.20 Insurance............................................................. 18
2.21 Major Customers....................................................... 19
2.22 Suppliers and Broadcast Stations...................................... 19
2.23 Minute Books.......................................................... 19
2.24 Brokers' and Finders' Fees............................................ 19
2.25 Disclosure............................................................ 19
2.26 Programming Supply and Affiliation Agreements......................... 19
</TABLE>
i
<PAGE>
<TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
<S> <C>
3.1 Organization.......................................................... 20
3.2 Corporate Power, Authorization and Validity of Agreement.............. 20
3.3 Capitalization of Purchaser........................................... 21
3.4 Purchaser Reports and Financial Statements............................ 21
3.5 No Approvals or Notices Required; No Conflict with Instruments........ 22
3.6 Absence of Certain Changes or Events.................................. 23
3.7 Information........................................................... 23
3.8 Brokers' and Finders' Fees............................................ 23
3.9 Investment............................................................ 24
3.10 Litigation............................................................ 24
3.11 Disclosure............................................................ 24
3.12 Fairness Opinion...................................................... 24
3.13 Tax-Free Transaction.................................................. 24
3.14 Licenses; Compliance with Regulatory Requirements; Intangible
Property............................................................. 24
3.15 Tax Matters........................................................... 25
3.16 Management of SNG..................................................... 25
ARTICLE IV
CONDUCT PENDING THE CLOSING
4.1 Conduct of Business of the Netlink Subsidiaries....................... 26
4.2 No Solicitation; Acquisition Proposals................................ 29
4.3 Proxy Statement....................................................... 30
4.4 Notice of Breach...................................................... 30
4.5 Restructuring......................................................... 30
ARTICLE V
OTHER COVENANTS
5.1 Access to Information................................................. 30
5.2 Confidentiality....................................................... 31
5.3 Publicity............................................................. 31
5.4 Proxy Statement; Other Filings; Cooperation........................... 31
5.5 Employment Matters.................................................... 32
5.6 Tax-Free Transaction.................................................. 32
</TABLE>
ii
<PAGE>
<TABLE>
ARTICLE VI
CONDITIONS PRECEDENT
<S> <C>
6.1 Conditions to Obligations of Each Party............................... 33
6.2 Additional Conditions to Obligations of Seller........................ 33
6.3 Additional Conditions to the Obligations of Purchaser................. 34
6.4 Primestar Transaction................................................. 35
6.5 Initial Closing....................................................... 35
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination........................................................... 35
7.2 Effect of Termination................................................. 36
7.3 Amendment............................................................. 36
7.4 Extension; Waiver..................................................... 36
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Seller............................................. 37
8.2 Indemnification by Purchaser.......................................... 38
8.3 Defense of Action..................................................... 39
8.4 Insurance Proceeds.................................................... 40
ARTICLE IX
TAX MATTERS
9.1 Tax Returns........................................................... 41
9.2 Termination of Prior Tax Settlement Agreements........................ 41
9.3 Pre-Closing Taxes..................................................... 41
9.4 Transfer Taxes........................................................ 42
9.5 Post-Closing Taxes.................................................... 42
9.6 Tax Cooperation....................................................... 42
9.7 Indemnification....................................................... 43
9.8 Notification of Proceedings, Control; Refunds......................... 44
9.9 Tax Effect of Payments................................................ 44
9.10 Withholding........................................................... 45
</TABLE>
iii
<PAGE>
<TABLE>
ARTICLE X
GENERAL PROVISIONS
<S> <C>
10.1 Survival............................................................. 45
10.2 Notices.............................................................. 45
10.3 Interpretation....................................................... 46
10.4 Counterparts......................................................... 46
10.5 Entire Agreement; Nonassignability; Parties in Interest.............. 47
10.6 Severability......................................................... 47
10.7 No Waiver............................................................ 47
10.8 Governing Law........................................................ 47
10.9 Rules of Construction................................................ 47
10.10 Expenses............................................................. 47
10.11 Attorneys Fees....................................................... 47
10.12 Further Assurances................................................... 48
</TABLE>
iv
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Terms Page
- ----- ----
<S> <C>
1998 Capital Budget.................................................... 9
Addition to Taxable Income............................................. 44
Agreement.............................................................. 1
Annual Financial Statements............................................ 8
Bonus Plan............................................................. 17
Class A Common Stock................................................... 21
Class B Common Stock................................................... 3
Closing................................................................ 3
Closing Date........................................................... 3
COBRA.................................................................. 17
Code................................................................... 3
Commission............................................................. 12
Commission Filings..................................................... 22
Companies.............................................................. 43
Contract Consent....................................................... 5
Contract Notice........................................................ 8
CRTC................................................................... 27
Denver 6 Business...................................................... 1
Employee Plans......................................................... 16
Environmental and Health Laws.......................................... 15
Equity Affiliate....................................................... 20
ERISA.................................................................. 15
Estimated Tax Payment.................................................. 28
Exchange Act........................................................... 12
Excluded Assets and Liabilities........................................ 2
FCC.................................................................... 14
FCC Licenses........................................................... 14
GAAP................................................................... 8
GE Transponder Agreement............................................... 27
Governmental Entity.................................................... 7
Hazardous Substances................................................... 15
Indemnified Party...................................................... 39
Indemnifying Party..................................................... 39
Initial Closing........................................................ 4
Initial Closing Date................................................... 4
Intellectual Property.................................................. 14
Interim Financial Statements........................................... 8
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
knowledge............................................................... 46
Licenses................................................................ 14
Lien.................................................................... 5
LMC Netlink............................................................. 1
LMC Netlink Shares...................................................... 2
Losses.................................................................. 38
Material Adverse Change................................................. 46
Material Adverse Effect................................................. 46
Minimum Amount.......................................................... 38
NASD.................................................................... 23
Netlink Businesses...................................................... 5
Netlink Interests....................................................... 7
Netlink International................................................... 7
Netlink Licenses........................................................ 14
Netlink Restructuring................................................... 2
Netlink Subsidiaries.................................................... 2
Netlink USA............................................................. 1
New Holdco.............................................................. 1
Non-Return Taxes........................................................ 41
Nondisclosure Agreement................................................. 31
Original Transaction.................................................... 1
Overpayment Rate........................................................ 43
Permits................................................................. 14
Permitted Encumbrances.................................................. 13
Post-Closing Returns.................................................... 42
Post-Closing Taxes...................................................... 42
Pre-Closing Companies Separate Tax Amounts.............................. 44
Pre-Closing Consolidated Returns........................................ 41
Pre-Closing Non-Consolidated Returns.................................... 41
Pre-Closing Tax Period.................................................. 42
Pre-Signing Period...................................................... 43
Preferred Stock......................................................... 21
Primestar............................................................... 1
Primestar Agreement..................................................... 1
Primestar Closing Date.................................................. 40
Primestar Shares........................................................ 1
Primestar Transaction................................................... 1
Proxy Statement......................................................... 23
Purchased Shares........................................................ 3
Purchaser............................................................... 1
Purchaser Licenses...................................................... 24
Purchaser Stock Option Plans............................................ 21
Purchaser Stockholders Meeting.......................................... 23
Refund.................................................................. 42
Requested Employee...................................................... 32
</TABLE>
vi
<PAGE>
<TABLE>
<S> <C>
Restrictions............................................................ 6
Revenue Sharing Agreement............................................... 13
Second Closing.......................................................... 4
Securities Act.......................................................... 6
Seller.................................................................. 1
Seller Disclosure Schedule.............................................. 5
Selling Affiliated Group................................................ 41
Settlement Agreements................................................... 41
SHVA.................................................................... 4
SHVA Agreement.......................................................... 4
SMATV Business.......................................................... 1
SNG..................................................................... 1
SNG Agreement........................................................... 1
SNG Corporations........................................................ 1
SNG Interest............................................................ 13
SNG Shares.............................................................. 2
SNG Subsidiaries........................................................ 2
SNG Subsidiary.......................................................... 2
SSI..................................................................... 19
Superstar Connection Agreement.......................................... 14
Tax Partnerships........................................................ 43
Tax Returns............................................................. 12
Taxes................................................................... 12
TCI..................................................................... 11
TCI Benefit Contributions............................................... 16
TCI Plans............................................................... 16
Telluride............................................................... 1
Telluride Shares........................................................ 2
Turner.................................................................. 1
UVSG Shares............................................................. 3
Westlink................................................................ 1
Westlink Shares......................................................... 2
WGN Agreements.......................................................... 14
WTCI.................................................................... 27
</TABLE>
vii
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") dated as of May 18,
1998, is between UNITED VIDEO SATELLITE GROUP, INC., a Delaware corporation
("Purchaser"), and LIBERTY MEDIA CORPORATION, a Delaware corporation ("Seller").
RECITALS
Seller owns all of the issued and outstanding shares of capital stock
of (i) Telluride Cablevision, Inc., a Delaware corporation ("Telluride"), (ii)
LMC Netlink Corporation, a Colorado corporation ("LMC Netlink") and (iii)
Westlink, Inc., a Colorado corporation ("Westlink"). LMC Netlink and Westlink
are referred to herein collectively as the "SNG Corporations", and Telluride and
the SNG Corporations are sometimes referred to herein collectively as the
"Netlink Corporations". Telluride, LMC Netlink and Westlink are each general
partners of Netlink USA, a Colorado general partnership ("Netlink USA"), with
20%, 40% and 40% partnership interests therein, respectively. Netlink USA owns
an approximate 40% membership interest in Superstar/Netlink Group LLC, a
Delaware limited liability company ("SNG") and owns and operates certain other
assets and businesses, including the business of providing certain programming
services to certain satellite master antenna television operations (the "SMATV
Business") and the business of distributing on a wholesale basis, the signals of
the broadcast stations known as the "Denver 6" (the "Denver 6 Business").
Purchaser owns an approximate 40% membership interest in SNG and, pursuant to
that agreement between Seller and Purchaser, dated March 11, 1996, as amended
and restated on August 9, 1996, relating to the formation of SNG (including any
amendments thereto, the "SNG Agreement"), has day-to-day management control of
SNG. The remaining approximately 20% membership interest in SNG is owned by
Turner Vision, Inc. ("Turner").
In February 1998, Seller and Purchaser announced their agreement in
principle with respect to the sale by Seller and the purchase by Purchaser, of
all the capital stock of the Netlink Corporations in consideration for the
issuance to Seller of 6,375,000 shares of Purchaser's common stock (the
"Original Transaction"). Subsequent thereto, Purchaser, Seller and Turner
commenced negotiations with PRIMESTAR, Inc. ("Primestar"), for the acquisition
by a new holding company to be formed by Primestar ("New Holdco") of beneficial
ownership of 100% of the membership interests in SNG, through a series of
reverse triangular mergers of the SNG Corporations, Turner and the subsidiary of
Purchaser that owns its interest in SNG (the "Primestar Transaction"). Upon
consummation of the Primestar Transaction, Seller's stock in the SNG
Corporations would be converted into and represent the right to receive a number
of shares of Series A Convertible Preferred Stock of New Holdco (the "Primestar
Shares") to be determined in accordance with the definitive documentation for
the Primestar Transaction to be entered into by Purchaser, Seller, Turner and
Primestar (as such definitive documentation, if entered into, may be amended
from time to time, the "Primestar Agreement").
In connection with the negotiations with Primestar, Purchaser and
Seller agreed that, if such negotiations were successful, the Original
Transaction would be restructured so that, on the terms
<PAGE>
and conditions set forth herein, (i) Seller would cause Netlink USA to be
restructured such that following such restructuring, Telluride would own
directly all of the businesses, assets and liabilities of Netlink USA (other
than the Excluded Assets and Liabilities) and (z) Westlink and LMC Netlink would
own in the aggregate 100% of the partnership interests in Netlink USA (which
would own after such restructuring, only the Excluded Assets and Liabilities)
(the "Netlink Restructuring"), (ii) Seller would agree to sell, and Purchaser
would agree to buy, all of the capital stock of Telluride in consideration of
the issuance to Seller of 1,275,000 shares of Purchaser's common stock and (iii)
Seller would agree to sell, and Purchaser would agree to purchase, (x) if the
Primestar Transaction is consummated, the Primestar Shares, and (y) if the
Primestar Transaction is not consummated, all of the capital stock of each of
the SNG Corporations in consideration of the issuance to Seller of 5,100,000
shares of Purchaser's common stock. The "Excluded Assets and Liabilities" means
Netlink USA's interest in SNG and any assets and liabilities of Netlink USA, LMC
Netlink and Westlink that relate solely to SNG or such interest in SNG.
The SNG Corporations and Netlink USA are sometimes referred to herein
individually as an "SNG Subsidiary" and collectively as the "SNG Subsidiaries;"
and the SNG Subsidiaries and Telluride are sometimes referred to herein
collectively as the "Netlink Subsidiaries."
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Sale of Stock. Upon the terms and subject to the conditions of
this Agreement and for the consideration set forth herein, Seller hereby agrees
to sell, transfer, assign and deliver to Purchaser (a) at the Closing or, if
applicable, at the Initial Closing (each as defined in Section 1.4) 100 shares
of common stock, par value, $1.00 per share of Telluride (the "Telluride
Shares"), and (b) at the Closing, (i) if the Primestar Transaction has been
consummated, the Primestar Shares or (ii) if the Primestar Transaction has not
been consummated (x) 1,000 shares of common stock, par value $1.00 per share, of
LMC Netlink ("LMC Netlink Shares") and (y) 1,000 shares of common stock, par
value $1.00 per share, of Westlink ("Westlink Shares" and, together with the LMC
Netlink Shares, the "SNG Shares"), in each case, together with the right to
receive all unpaid dividends or other distributions declared or otherwise
payable with respect to such Telluride Shares, Primestar Shares or SNG Shares
(and, with respect to the Primestar Shares, any dividends or distributions paid
with respect to such shares, together with, in the case of cash dividends, an
amount equal to interest thereon at a rate per annum equal to Seller's overnight
investment rate calculated for actual days elapsed in the period from, but not
including, the date the dividend is received by Seller to the date delivered to
Purchaser), as applicable, free and clear of all Liens and Restrictions (other
than Liens and Restrictions created pursuant to this Agreement or the Primestar
Agreement).
2
<PAGE>
1.2 Purchase of Stock. Upon the terms and subject to the conditions
of this Agreement, Purchaser hereby agrees to purchase at the Closing all, but
not less then all, of the Telluride Shares and all, but not less than all, of
the applicable of the Primestar Shares or the SNG Shares and to issue in
exchange therefor an aggregate of 6,375,000 newly issued, fully paid and
nonassessable shares of Class B Common Stock, par value $.01 per share of
Purchaser (the "Class B Common Stock") (the shares of Class B Common Stock to be
issued pursuant to this sentence being sometimes referred to herein collectively
as the "UVSG Shares"). The Telluride Shares and the applicable of the SNG
Shares or the Primestar Shares are sometimes referred to herein collectively as
the "Purchased Shares." The number and type of Telluride Shares, SNG Shares and
UVSG Shares shall be appropriately adjusted to reflect any stock split, reverse
split, stock dividend or other reclassification or reorganization affecting the
capital stock of the applicable issuer, the record date for which occurs after
the date hereof.
1.3 Tax Treatment. The parties intend that the transfer of the
Telluride Shares and the transfer of either the SNG Shares or the Primestar
Shares, as applicable, in exchange for the UVSG Shares as contemplated by this
Agreement will qualify as a tax-free transaction pursuant to Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code").
1.4 The Closing.
(a) Subject to the terms and conditions of this Agreement, the
closing of the purchase by Purchaser of the Purchased Shares (the "Closing")
shall take place (i) at the offices of Holme Roberts & Owen LLP, 1700 Lincoln
Street, Suite 4100, Denver, Colorado 80203, at 10:00 a.m., local time, on the
first business day following the day on which the conditions set forth in
Article VI shall be fulfilled or waived in accordance herewith or (ii) at such
other time, date or place as the parties hereto agree. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date."
(b) At the Closing, (i) Seller shall deliver to Purchaser stock
certificates representing the Purchased Shares, duly endorsed in blank, or with
separate notarized stock transfer powers attached thereto and signed in blank,
together with all other instruments of transfer necessary or appropriate to
transfer the Purchased Shares to Purchaser and (ii) Purchaser in exchange
therefor shall deliver or cause to be delivered to Seller newly issued stock
certificates representing the UVSG Shares registered in the name of Seller.
(c) At the Closing, the parties shall deliver or cause to be
delivered the certificates and other documents required to be delivered pursuant
to Article VI hereof.
(d) Notwithstanding the foregoing, if the Closing has not occurred by
the tenth (10th) day following the approval of the issuance of the UVSG Shares
at the Purchaser's Stockholders Meeting, then so long as the other conditions
set forth in Article VI have been satisfied (other than (i) those conditions
which have been waived, (ii) the condition requiring consummation or termination
of the Primestar Transaction, and (iii) any conditions which may only be
satisfied at the Closing or which do not prevent or affect the parties' ability
to consummate the sale of the Telluride Shares), at Seller's election, by notice
to Purchaser at any time thereafter, the closing of the purchase and sale of the
Telluride Shares (the "Initial Closing") will be held at the place determined in
accordance with
3
<PAGE>
Section 1.4(a), at 10:00 a.m., local time, on the date set forth in Seller's
notice to Purchaser of its election pursuant to this Section 1.4(d) (or at such
other time, date or place as the parties hereto may agree). The date on which
the Initial Closing occurs is hereinafter referred to as the "Initial Closing
Date". If such election is made, Seller and Purchaser shall make the deliveries
at the Initial Closing referred to in Section 1.4(b) and (c) as if the
references therein to the Purchased Shares referred to the Telluride Shares and
the references therein to the UVSG Shares referred to 1,275,000 shares of Class
B Common Stock (adjusted as contemplated by the last sentence of Section 1.2).
In such event, the transfer of the balance of the Purchased Shares will be
effected, subject to the terms and conditions of this Agreement, at a subsequent
closing (the "Second Closing") to be held on the date and at the time and place
determined in accordance with Section 1.4(a). At the Second Closing, Seller and
Purchaser shall make the deliveries referred to in Section 1.4(b) and (c) as if
the references therein to the Purchased Shares referred to the Primestar Shares
or the SNG Shares, as applicable, and the references therein to the UVSG Shares
referred to 5,100,000 shares of Class B Common Stock (adjusted as contemplated
by the last sentence of Section 1.2).
(e) At the Closing, or, if applicable, the Second Closing, Seller
shall be deemed to have assumed the obligations of Netlink USA under Section 10
of the Joint Venture Terms incorporated into the SNG Agreement, notwithstanding
the sale or transfer of the SNG Corporations, and Netlink USA shall thereupon be
released from such obligations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
It is expressly understood and agreed by the parties that Seller is
not making any representation or warranty with respect to (i) SNG, including,
without limitation, its condition (financial or otherwise), assets, liabilities,
business, operations, results of operations, customers, management, employees or
prospects (other than Seller's representation in Section 2.15(b) as to Netlink
USA's ownership of its interest in SNG), (ii) compliance by Seller or the
Netlink Subsidiaries with the Satellite Home Viewer Act of 1994, as amended (the
"SHVA") or (iii) the effect on the Netlink Subsidiaries and their respective
condition (financial or otherwise), assets, liabilities, business, operations,
results of operations, customers, management, employees or prospects of entering
into (upon its becoming effective) or not entering into the Settlement and
Compliance Agreement, executed by Netlink USA and Telluride as of May 1, 1998,
between ABC, Inc., CBS Broadcasting Inc., Fox Broadcasting Company, National
Broadcasting Company, and Certain ABC, CBS, Fox, and NBC Network Stations; the
National Association of Broadcasters; the ABC Television Affiliates Association,
the CBS Television Affiliates Association, the Fox Television Affiliates
Association, and the NBC Television Affiliates Association and Primestar
Partners, L.P. and Netlink USA and Telluride (the "SHVA Agreement").
Except as disclosed in a document of even date herewith and delivered
by Seller to Purchaser prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Seller
Disclosure Schedule"), Seller represents and warrants to Purchaser as follows:
4
<PAGE>
2.1 Organization--Seller. Seller (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of the State of Delaware, (ii) has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted and (iii) is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary, except in the case of each of clauses (i), (ii)
and (iii) where the failure to be in good standing, to have such power and
authority or to be so duly qualified or licensed and in good standing has not
had and is not reasonably likely to have a Material Adverse Effect on the
Netlink Subsidiaries or the Netlink Businesses, in either case taken as a whole.
As used herein, (x) the term "Netlink Businesses" means all of the businesses,
assets and liabilities of Netlink USA, including the SMATV Business, the Denver
6 Business, and Netlink USA's interest in the WGN Agreements (as defined
herein), but excluding the Excluded Assets and Liabilities (it being understood
that the Excluded Assets and Liabilities include any liability of Netlink USA
under the SNG Agreement).
2.2 Corporate Power, Authorization and Validity of Agreement, No
Conflicts. Seller has all requisite corporate power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. Subject to the satisfaction of the conditions
set forth in Article VI, the execution, delivery and performance by Seller of
this Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on its part.
This Agreement has been duly executed and delivered by Seller and is a valid and
binding obligation of Seller, enforceable in accordance with its terms (except
insofar as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, (a) violate or conflict with any
permit, order, license, decree, judgment, statute, law, ordinance, rule or
regulation applicable to Seller or (b) result in any breach or violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of, or
result in the creation of any mortgage, pledge, lien, encumbrance, charge, or
other security interest (a "Lien") on any of the properties or assets of Seller
pursuant to, or require any consent by or approval or authorization of (a
"Contract Consent") any party to any mortgage, indenture, lease, contract or
other agreement or instrument, bond, note, concession or franchise applicable to
Seller or any of its properties or assets, except, in each case, where such
conflict, violation, default, termination, cancellation, acceleration, Lien or
lack of consent would not have and is not reasonably likely to have a Material
Adverse Effect on the Netlink Subsidiaries or the Netlink Businesses, in either
case taken as a whole, or to prevent the consummation of the transactions
contemplated hereby.
2.3 Shares. Seller has good title to the Telluride Shares and the
SNG Shares, which constitute all of the outstanding shares of capital stock of
the Netlink Corporations. Seller is the record and the beneficial owner of the
Telluride Shares and the SNG Shares, with the sole right to vote, dispose of,
and receive dividends or distributions with respect to such shares. All of the
Telluride Shares and the SNG Shares are duly authorized, validly issued, fully
paid and non-assessable and are free and clear of any Lien and are not subject
to any Restrictions (other than any
5
<PAGE>
Liens or Restrictions created by this Agreement or that may arise out of the
negotiations with respect to the Primestar Transaction and other than any
restrictions on transfer arising under the Securities Act of 1933, as amended
(the "Securities Act") and state securities laws). In this Agreement, any
reference to "Restrictions", with respect to any capital stock, partnership
interest, membership interest in a limited liability company or other security,
shall mean any voting or other trust or agreement, option, warrant, preemptive
right, right of first offer, right of first refusal, escrow arrangement, proxy,
buy-sell agreement, power of attorney or other contract, any law, rule,
regulation, order, judgment or decree which, conditionally or unconditionally,
(i) grants to any Person the right to purchase or otherwise acquire, or
obligates any Person to sell or otherwise dispose of or issue, or otherwise
results or, whether upon the occurrence of any event or with notice or lapse of
time or both or otherwise, may result in any person acquiring, (A) any of such
capital stock or other security; (B) any of the proceeds of, or any
distributions paid or which are or may become payable with respect to, any of
such capital stock or other security; or (C) any interest in such capital stock
or other security or any such proceeds or distributions; (ii) restricts or,
whether upon the occurrence of any event or with notice or lapse of time or both
or otherwise, is reasonably likely to restrict the transfer or voting of, or the
exercise of any rights or the enjoyment of any benefits arising by reason of
ownership of, any such capital stock or other security or any such proceeds or
distributions; or (iii) creates or, whether upon the occurrence of any event or
with notice or lapse of time or both or otherwise, is reasonably likely to
create a Lien or purported Lien affecting such capital stock or other security,
proceeds or distributions.
2.4 Organization--Netlink Subsidiaries. Each of the Netlink
Corporations is a corporation duly organized and validly existing and in good
standing under the laws of its jurisdiction of organization, has all requisite
corporate power to own its properties and to carry on its business as now being
conducted and as proposed to be conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would have a Material Adverse Effect on the
Netlink Subsidiaries taken as a whole. Netlink USA is a general partnership duly
organized and validly existing and in good standing under the laws of the State
of Colorado, has all requisite partnership power to own its properties and to
carry on its business as now being conducted and as proposed to be conducted and
is duly qualified to do business and is in good standing in each jurisdiction in
which the failure to be so qualified and in good standing would have a Material
Adverse Effect on the Netlink Subsidiaries taken as a whole. Seller has
delivered to Purchaser true and correct copies of the Certificate or Articles of
Incorporation and Bylaws of each of the Netlink Corporations and the Partnership
Agreement of Netlink USA, each as amended to date. No Netlink Subsidiary is in
violation of any of the provisions of its Certificate or Articles of
Incorporation or Bylaws or equivalent organizational documents.
2.5 Capitalization. The authorized capital stock of LMC Netlink
consists of 10,000 shares of common stock, par value $1.00 per share, of which
there are issued and outstanding 1,000 shares. The authorized capital stock of
Westlink consists of 10,000 shares of common stock, par value $1.00 per share,
of which there are issued and outstanding 1,000 shares. The authorized capital
stock of Telluride consists of 50,000 shares of common stock, par value $1.00
per share, of which there are issued and outstanding 100 shares. There are no
other outstanding shares of capital stock or other securities or other ownership
interests of any of the Netlink Corporations and no outstanding
6
<PAGE>
subscriptions, options, warrants, puts, calls, rights, exchangeable or
convertible securities or other commitments or agreements of any nature relating
to the capital stock or other securities or ownership interests of any of the
Netlink Corporations, or otherwise obligating any of the Netlink Corporations to
issue, transfer, sell, purchase, redeem or otherwise acquire such stock,
securities or ownership interests.
2.6 Subsidiaries. None of the Netlink Corporations or Netlink USA
owns, directly or indirectly, any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for, any equity or similar interest
in, any corporation, partnership, joint venture or other business association or
entity, other than the respective partnership interests of the Netlink
Corporations in Netlink USA and the membership interest of Netlink USA in SNG.
The record and beneficial ownership of the partnership interests in Netlink USA
(the "Netlink Interests"), is as set forth on Schedule 2.6 of the Seller
Disclosure Schedule. There are no outstanding partnership, ownership or other
interests or securities of Netlink USA other than the Netlink Interests, and no
outstanding subscriptions, options, warrants, puts, calls, rights, exchangeable
or convertible securities or other commitments or agreements of any nature
relating to the partnership, ownership or other interests or securities of
Netlink USA, or otherwise obligating Netlink USA to issue, transfer, sell,
purchase, redeem or otherwise acquire such interests or securities. All of the
Netlink Interests are duly authorized, validly issued, fully paid and non-
assessable and are free and clear of any Lien and are not subject to any
Restrictions, other than any Liens or Restrictions created by this Agreement or
that may arise out of the negotiations with respect to the Primestar Transaction
and other than any restrictions on transfers arising under the Securities Act or
state securities laws. Netlink International, Inc., a Colorado corporation
("Netlink International") was dissolved effective April 30, 1998, and did not
conduct any operations or have any employees since its inception.
2.7 No Conflicts, Notices. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, (a) conflict with or violate any provision of the Certificate or
Articles of Incorporation or Bylaws of any of the Netlink Corporations or the
partnership agreement of Netlink USA, (b) violate or conflict with any permit,
order, license, decree, judgment, statute, law, ordinance, rule or regulation
applicable to any of the Netlink Subsidiaries or the properties or assets of any
of the Netlink Subsidiaries, or (c) result in any breach or violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of, or
result in the creation of any Lien on any of the properties or assets of any of
the Netlink Subsidiaries pursuant to, or require any Contract Consent of any
party to any material mortgage, indenture, lease, contract or other agreement or
instrument, bond, note, concession or franchise applicable to any of the Netlink
Subsidiaries or any of their properties or assets, except in the case of clauses
(b) and (c), where such conflict, violation, breach, default, termination,
cancellation, acceleration, Lien or lack of consent would not have and is not
reasonably likely to have a Material Adverse Effect on either the Netlink
Subsidiaries or the Netlink Businesses, in either case taken as a whole. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality ("Governmental Entity") is required by
or with respect to Seller or the Netlink Subsidiaries in connection with the
execution and delivery of this Agreement by Seller or the consummation by Seller
and the Netlink Subsidiaries of the transactions contemplated hereby, except for
(i) any filings as may be required under applicable state or federal
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securities laws and the securities laws of any foreign country and (ii) such
other consents, authorizations, filings, approvals, orders and registrations
which, if not obtained or made, would not have a Material Adverse Effect on
either the Netlink Subsidiaries or the Netlink Businesses, in either case taken
as a whole, and would not prevent or materially alter or delay any of the
transactions contemplated by this Agreement. None of Seller, the Netlink
Subsidiaries or any of their affiliates is or will be required to give any
notice (a "Contract Notice") to any party (other than Purchaser and its
subsidiaries) to any material mortgage, indenture, lease, contract or other
agreement or instrument, bond, note, concession or franchise applicable to any
of the Netlink Subsidiaries or any of their properties or assets in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
2.8 Financial Statements. Seller has heretofore delivered to
Purchaser a true and complete copy of the Combined Financial Statement of the
Netlink Wholesale Division as of December 31, 1997 and for the calendar year
then ended (including the notes thereto, the "Annual Financial Statements") and
a true and complete copy of the Combined Financial Statement of the Netlink
Wholesale Division as of March 31, 1998 and for the quarterly period then ended
(including the notes thereto, the "Interim Financial Statements"). The Annual
Financial Statements and the Interim Financial Statements were each prepared in
accordance with generally accepted accounting principles (as accepted by the
accounting profession in the United States) as in effect as of the relevant time
("GAAP") consistently applied (except as indicated in the notes thereto) and on
that basis fairly present (subject in the case of the Interim Financial
Statements, to normal year end adjustments) the financial condition and
operating results of the Netlink Businesses at the dates and during the periods
indicated therein.
2.9 Absence of Certain Changes. Since December 31, 1997, other than
as contemplated or required by this Agreement (including the negotiations with
respect to the Primestar Transaction), each of the Netlink Subsidiaries has
conducted its business in the ordinary course consistent with past practice and
there has not occurred:
(a) any Material Adverse Change in the Netlink Businesses taken
as a whole (excluding changes, events or conditions generally
affecting the cable television industry or satellite television
industry in the United States or affecting general business or
economic conditions in the United States);
(b) any sale, lease or other transfer or disposition of any
material asset of any of the Netlink Subsidiaries;
(c) any change in accounting methods, practices or policies
(including any change in depreciation or amortization policies or
rates) by any of the Netlink Subsidiaries or any revaluation by any of
the Netlink Subsidiaries of any of its assets;
(d) any declaration, setting aside, or payment of any dividend
or other distribution to the Seller (other than dividends and
distributions consistent with past practice), or any direct or
indirect redemption, retirement, purchase or other acquisition by
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any Netlink Subsidiary of any of its capital stock or other securities
or options, warrants or other rights to acquire capital stock;
(e) any material modification or change to any material contract
by any of the Netlink Subsidiaries, other than in the ordinary course
of business;
(f) any commitment or transaction (including any capital
expenditure or capital financing) by any of the Netlink Subsidiaries
for any amount that requires payments in excess of $100,000 with
respect to any individual contract or a series of related contracts
other than (x) any commitment or transaction in the ordinary course of
business consistent with past practice or (y) capital expenditures not
in excess of the amount provided for capital expenditures in the
Netlink International Fiscal 1998 Operating Income Budget -- Capital
Costs (the "1998 Capital Budget"), a complete and correct copy of
which has been provided to Purchaser;
(g) any written waiver or written release of any right or claim
of substantial value by any of the Netlink Subsidiaries;
(h) any payment, discharge or satisfaction of any material
claim, liability or obligation by any of the Netlink Subsidiaries,
other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of liabilities
reflected or reserved against in its latest balance sheet included in
the Annual Financial Statements or incurred since the date of such
balance sheet in the ordinary course of business and consistent with
past practice and other than scheduled repayments of indebtedness
reflected on the latest balance sheet included in the Annual Financial
Statements;
(i) any issuance or sale of capital stock or other securities or
membership or other ownership interests, exchangeable or convertible
securities, options, warrants, puts, calls or other rights to acquire
capital stock or other securities or other ownership interests of any
of the Netlink Corporations or Netlink USA;
(j) any incurrence, assumption or guarantee by any Netlink
Subsidiary of any indebtedness for borrowed money;
(k) the making of any loan or advance by any Netlink Subsidiary
(other than in the ordinary course of business consistent with past
practice) to any director, officer or affiliate of any Netlink
Subsidiary (other than any other Netlink Subsidiary), other than as
contemplated or otherwise permitted by this Agreement and other than
as required by the terms of an existing contract described on the
Seller Disclosure Schedule;
(l) any increase in salary, wage, benefit or other remuneration
payable or to become payable to any current or former officer,
director, employee or agent of any of the Netlink Subsidiaries or any
increase in any bonus or severance payment or arrangement made to, for
or with any of its officers, directors, employees or agents or any
grant of a supplemental retirement plan or program or special
remuneration for any officer, director,
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employee or agent of any of the Netlink Subsidiaries, in each case
other than in the ordinary course of business and consistent with past
practice (including regular annual salary and performance bonus
increases);
(m) any material change in the policies or practices of the
Netlink Subsidiaries with respect to the granting of credit or the
provision of services;
(n) any delay in the payment of any trade or other payables
other than in the ordinary course of business and consistent with past
practice; or
(o) any agreement by Seller or any of the Netlink Subsidiaries
to do any of the foregoing.
2.10 Liabilities. Except as reflected in the Interim Financial
Statements and except for liabilities or obligations that are not in the
aggregate material to the business, assets, results of operations or financial
condition of the Netlink Subsidiaries or the Netlink Businesses, in either case
taken as a whole, or that arise in the ordinary course of business after the
date of the Interim Financial Statements or that arise from changes or events
affecting the satellite television industry generally or that arise out of the
SNG Agreement or Netlink USA's interest in SNG, (a) no Netlink Subsidiary has
any actual or potential liability or obligation of any nature, whether due or to
become due, whether absolute, accrued, fixed or contingent or otherwise; and (b)
neither Seller nor any of the Netlink Subsidiaries has knowledge of any existing
fact or circumstances that will or are reasonably likely to give rise in the
future to any liability or obligation of any Netlink Subsidiary.
2.11 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending or, to the knowledge of
Seller or any of the Netlink Subsidiaries, threatened before any agency, court
or tribunal, foreign or domestic, against Seller or any of the Netlink
Subsidiaries or any of their assets and properties or any of their officers or
directors (in their capacities as such) that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on the Netlink
Subsidiaries or the Netlink Businesses, in either case taken as a whole. There
is no judgment, decree or order outstanding against Seller or any Netlink
Subsidiary or any director or officer of any Netlink Subsidiary (in their
capacities as such), that is reasonably likely to prevent consummation of the
transactions contemplated by this Agreement or that is reasonably likely to have
a Material Adverse Effect on the Netlink Subsidiaries or the Netlink Businesses,
in either case taken as a whole.
2.12 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon any Netlink
Subsidiary which has or could have the effect of prohibiting or materially
impairing any current business practice of any of the Netlink Subsidiaries or
the conduct of business by any Netlink Subsidiary as currently conducted.
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2.13 Tax Matters. For purposes of this Section 2.13, any tax item
shown on a return or report furnished by SNG to any Netlink Subsidiary shall be
presumed correct.
(a) Since January 1, 1993, each of the Netlink Subsidiaries and any
predecessors of any of them has duly and timely filed all returns and reports
with respect to Taxes required to be filed by it for all taxable years or
portions thereof through the date of this Agreement. Such Tax Returns and
reports have been prepared in accordance with all applicable government
regulations and are accurate and complete in all material respects. Each of the
Netlink Subsidiaries and their respective predecessors, as applicable, have each
timely paid or adequately provided for all Taxes due and payable in respect of
any transaction for which Taxes are due or any Taxes chargeable against its or
their revenue, assets or income through the date of this Agreement (whether or
not shown on any Tax Returns).
(b) There are no recorded tax liens upon any of the assets of the Netlink
Subsidiaries except Liens for current Taxes not yet due or Liens that are being
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on the books of the
applicable Netlink Subsidiary.
(c) Since its formation Netlink USA has qualified as a partnership for
Federal income tax purposes.
(d) No proposed Taxes or Tax deficiencies have been asserted and no
proceedings with respect to Taxes have been commenced against, in each case, the
Netlink Subsidiaries and their respective predecessors. None of the Netlink
Subsidiaries has waived any statute of limitation in respect of any Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
(e) None of the Netlink Subsidiaries has filed a consent under Section
341(f) of the Code.
(f) None of the Netlink Subsidiaries has made any payments, nor are any of
them obligated to make any payments, and none of them is a party to any
agreement that under certain circumstances could obligate it to make any
payments as a result of the transactions contemplated by this Agreement to any
employee, member, officer or director of, or any independent contractor or other
person who performs personal services for, any of the Netlink Subsidiaries or
any of their respective affiliates who is a "disqualified individual" (as such
term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or employee benefit plan currently in effect which would be characterized as an
"excess parachute payment" (as such term is defined in Section 280G(b)(1) of the
Code).
(g) Since September 1, 1994, none of the Netlink Subsidiaries is or has
been a member of an affiliated group filing a consolidated federal income Tax
Return other than a group of which Tele-Communications, Inc. ("TCI") is the
common parent.
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(h) None of the Netlink Corporations has agreed to, nor is any Netlink
Corporation required to make, any adjustment under Section 481(a) of the Code by
reason of a change in accounting method made in contemplation of this
transaction which would have a Material Adverse Effect on such Netlink
Corporation after the closing (for this purpose any accounting method change
made by SNG itself shall not be taken into account).
(i) In this Agreement, any reference to
(i) the term "Taxes" shall mean all taxes, however, denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, territorial, state,
local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality
of the foregoing, all income or profits taxes, payroll and employee
withholding taxes, unemployment insurance, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, business license taxes, occupation taxes, real and personal property
taxes, stamp taxes, environmental taxes, transfer taxes, workers'
compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar
nature to any of the foregoing, which any of the Netlink Subsidiaries is
required to pay, withhold or collect; and
(ii) the term "Tax Returns" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns relating
to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
2.14 Contracts and Commitments. Seller has provided Purchaser with a true
and complete list of all of the affiliation agreements between each of the
Netlink Subsidiaries and its customers (other than Purchaser and its
subsidiaries). Other than such affiliation agreements and other than any
agreements with Purchaser or its subsidiaries, Schedule 2.14 of the Seller
Disclosure Schedule lists all material contracts to which a Netlink Subsidiary
is a party that are to be performed in whole or in part after the date hereof
and that would be required to be filed with the Securities and Exchange
Commission (the "Commission") as "material contracts" pursuant to Item 601 of
Regulation S-K of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") if the Netlink Businesses were a single registrant registered under
Section 12(g) of the Exchange Act. Schedule 2.14 of the Seller Disclosure
Schedule also lists (a) all agreements, bonds, notes, debentures or similar
instruments evidencing (i) indebtedness of any Netlink Subsidiary for borrowed
money or for the deferred purchase price of any material property or service
(other than trade accounts arising in the ordinary course of business), (ii)
obligations of any Netlink Subsidiary under capital leases, (iii) guaranties by
any Netlink Subsidiary of liabilities or obligations of others (other than any
other Netlink Subsidiary), and (iv) any Liens on the assets of any Netlink
Subsidiary securing the indebtedness of others (other than any other Netlink
Subsidiary), (b) agreements that limit the right of any Netlink Subsidiary to
compete in any line of business; or (c) agreements which, after giving effect to
the transactions contemplated hereby, purport to restrict or bind Purchaser or
any of its subsidiaries, other than the Netlink Subsidiaries, in each case,
other than any of the foregoing with Purchaser or its subsidiaries. True and
complete copies of all agreements listed in Schedule 2.14 of
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the Seller Disclosure Schedule have been made available to Purchaser. Each of
the Netlink Subsidiaries has fulfilled in all material respects, or taken all
actions necessary to enable it to fulfill in all material respects when due, its
obligations under each of such agreements to which it is a party. To the
knowledge of Seller, all parties thereto other than the Netlink Subsidiaries
have complied in all material respects with the provisions thereof and no party
is in breach or violation of, or in default (with or without notice or lapse of
time, or both) under such agreements which breach, violation or default would
reasonably be expected to have a Material Adverse Effect on the Netlink
Subsidiaries or the Netlink Businesses, in either case taken as a whole. No
Netlink Subsidiary has received any notice of termination, cancellation or
acceleration of any such agreement.
2.15 Adequacy of Assets; Intangible Property.
(a) The assets owned or leased by the Netlink Subsidiaries are suitable
and adequate for the conduct of their respective businesses and the Netlink
Subsidiaries have good and, with respect to real property owned in fee,
marketable title to or valid leasehold or other contractual interests in all
such assets that are material to the Netlink Businesses as a whole, free and
clear of all Liens other than Permitted Encumbrances. For purposes of this
Agreement, "Permitted Encumbrances" means the following Liens: (i) Liens for
Taxes, assessments or other governmental charges or levies not at the time
delinquent or thereafter payable without penalty or being contested in good
faith by appropriate proceedings and for which adequate reserves shall have been
set aside on the books of the applicable Netlink Subsidiary in accordance with
GAAP; (ii) Liens of carriers, warehousemen, mechanics, materialmen and landlords
incurred in the ordinary course of business for sums not overdue or being
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on the books of the
applicable Netlink Subsidiary; (iii) Liens incurred in the ordinary course of
business in connection with workmen's compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure performance of
tenders, statutory obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure obligations
on surety or appeal bonds; (iv) purchase money security interests or Liens on
property acquired or held by a Netlink Subsidiary in the ordinary course of
business to secure the purchase price of such property or to secure indebtedness
incurred solely for the purpose of financing the acquisition of such property;
and (v) easements, restrictions and other minor defects of title which are not,
in the aggregate, material or which do not, individually or in the aggregate,
materially and adversely affect the value of the property affected thereby.
(b) Netlink USA owns an approximate 39.805% record and beneficial
membership interest (the "SNG Interest") in SNG. The SNG Interest is owned by
Netlink USA free and clear of any Liens and is not subject to any Restrictions,
in each case, created by Seller or any of the Netlink Subsidiaries, except for
Liens or Restrictions created by this Agreement or the SNG Agreement or that may
arise out of the negotiations with respect to the Primestar Transaction and
other than any restrictions on transfers under the Securities Act and state
securities laws. After giving effect to the Netlink Restructuring, Telluride
will hold the interest now held by Netlink USA in that certain Revenue Sharing
Agreement dated as of September 1, 1991, between Purchaser (formerly known as
United Video, Inc.) and Netlink USA (the "Revenue Sharing Agreement"), and that
certain Agreement for Acquisition of Wholesale Business dated as of September 1,
1991, between Superstar
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Connection, a Delaware general partnership, and Netlink USA (the "Superstar
Connection Agreement" and, together with the Revenue Sharing Agreement, the "WGN
Agreements"), free and clear of any Lien, except for Liens created by the WGN
Agreements.
(c) One or more of the Netlink Subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights, and trade secrets (collectively,
"Intellectual Property") that are used in the Netlink Businesses as currently
conducted, except to the extent that the failure to have such rights has not had
and is not reasonably likely to have a Material Adverse Effect on the Netlink
Businesses taken as a whole. Neither Seller nor the Netlink Subsidiaries has
received notice of any claim of infringement of the rights of others with
respect to any patents, trademarks, service marks, trade names or copyrights
used or owned by the Netlink Subsidiaries, the loss of which is reasonably
likely to have a Material Adverse Effect on the Netlink Businesses taken as a
whole. Neither Seller nor the Netlink Subsidiaries has any knowledge that any
of the Netlink Subsidiaries is infringing upon or otherwise violating, or has
since January 1, 1995 infringed upon or otherwise violated, the rights of any
third party with respect to any patent, trademark, trade name, service mark or
copyright. To the best knowledge of Seller, no current or former employee of
any Netlink Subsidiary is or was a party to any confidentiality agreement and/or
agreement not to compete which restricts or forbids or restricted or forbade at
any time during such employee's employment by such Netlink Subsidiary, such
employee's performance of any activity that such employee was hired to perform.
To the best knowledge of Seller, no Netlink Subsidiary is currently using or has
in the past used without appropriate authorization, any confidential information
or trade secrets of any third party. Since January 1, 1995, Seller has not
received any notice alleging such conduct.
2.16 Licenses; Compliance with Regulatory Requirements.
(a) The Netlink Subsidiaries hold all licenses, franchises, ordinances,
authorizations, permits, certificates, variances, exemptions, concessions,
leases, rights of way, easements, instruments, orders and approvals, domestic or
foreign ("Licenses") which are material to the ownership of the assets that are
material to the Netlink Businesses, taken as a whole (collectively, the "Netlink
Licenses"). Each Netlink Subsidiary is in compliance with, and has conducted
its business so as to comply with, the terms of their respective Netlink
Licenses and with all applicable laws, rules, regulations, ordinances and codes,
domestic or foreign, except where the failure so to comply has not had and,
insofar as reasonably can be foreseen, in the future will not have, either
individually or in the aggregate, a Material Adverse Effect on the Netlink
Businesses taken as a whole. Without limiting the generality of the foregoing,
the Netlink Subsidiaries, (i) have all Licenses (the "FCC Licenses") issued by
the Federal Communications Commission (the "FCC") and all other Licenses of
foreign, federal, state and local governmental authorities (the "Permits")
required for the operation of the facilities being operated by the Netlink
Subsidiaries in the conduct of the Netlink Businesses, and all such FCC Licenses
and Permits are identified on Schedule 2.16 on the Seller Disclosure Schedule,
(ii) have duly and currently filed all reports and other information required to
be filed by the FCC or any other Governmental Entity in connection with such FCC
Licenses and Permits, and (iii) are not in violation of any of such FCC Licenses
or Permits, other than the lack of FCC Licenses or Permits, delays in filing
reports or possible violations which have not had and, insofar as can reasonably
be foreseen, in the future will not have a Material Adverse
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Effect on the Netlink Businesses taken as a whole. Notwithstanding the
foregoing, Seller makes no representation as to whether or not the Netlink
Subsidiaries are transmitting the signals of broadcast network stations to
households which are not "unserved households" under SHVA.
(b) The Netlink Subsidiaries have duly complied with, and the
operation of its business, equipment and other assets and the facilities owned
or leased by any Netlink Subsidiary are in compliance with, the provisions of
all applicable Environmental and Health Laws, except for non-compliance which
would not reasonably be expected to have a Material Adverse Effect on any of the
Netlink Businesses taken as a whole. For purposes of this Agreement, the term
"Environmental and Health Laws" means any federal, state or local law, statute,
rule or regulation or the common law relating to the environment or occupational
health and safety, including any statute, regulation or order pertaining to (i)
treatment, storage, disposal, generation and transportation of pollutants,
contaminants, chemicals, industrial, toxic or hazardous substances, oil or
petroleum products or solid or hazardous waste (collectively referred to
hereinafter as "Hazardous Substances"); (ii) air, water and noise pollution;
(iii) groundwater and surface water contamination; (iv) the release into the
environment of Hazardous Substances, including without limitation emissions,
discharges, injections, spills, escapes or dumping of pollutants, contaminants
or chemicals; (v) the protection of wild life, marine sanctuaries and wetlands,
including without limitation all endangered and threatened species; (vi) storage
tanks, vessels and containers containing Hazardous Substances; (vii) underground
storage tanks, abandoned, disposed or discarded barrels and other closed
receptacles containing Hazardous Substances; (viii) health and safety of
employees; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of Hazardous Substances. As used
herein, the terms "release" and "environment" have the meanings set forth in the
federal Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended. To the knowledge of Seller, there are no investigations,
administrative proceedings, judicial actions, orders, claims or notices that are
pending, anticipated or threatened against any Netlink Subsidiary relating to
any Environmental and Health Laws. Neither Seller nor any Netlink Subsidiary has
received a notice of or knows any facts which constitute a violation by any
Netlink Subsidiary of or give rise to liability of any Netlink Subsidiary under
any Environmental and Health Laws that in either case would or would be
reasonably likely to have a Material Adverse Effect on the Netlink Businesses
taken as a whole.
2.17 Employee Benefit Plans.
(a) Schedule 2.17 of the Seller Disclosure Schedule lists, with
respect to the Netlink Subsidiaries, (i) all material employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), (ii) any stock option, stock purchase, phantom stock,
stock appreciation right, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation, cafeteria benefit
(Section 125 of the Code) or dependent care (Section 129 of the Code), life
insurance or accident insurance plans, programs or arrangements, (iii) all
bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements, (iv) other fringe or employee benefit plans,
programs or arrangements that apply to senior management of the Netlink
Subsidiaries and that do not generally apply to all employees of the Netlink
Subsidiaries, in each case, that are currently maintained or directly
contributed to by the Netlink Subsidiaries or have been maintained or
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contributed to by the Netlink Subsidiaries since January 1, 1995 (collectively,
the "Employee Plans"). The parties agree that the term "Employee Plans" shall
not include any of the foregoing which are contributed to or maintained by TCI
or Seller and which cover any present or former employee, consultant or director
of the Netlink Subsidiaries in addition to other employees of TCI, Seller or
their respective subsidiaries (the "TCI Plans"). Except as set forth in the
following sentence, Seller is making no representation or warranty in this
Agreement regarding the TCI Plans. Other than (i) an annual payment not in
excess of $2,000 per employee by the Netlink Subsidiaries to TCI for each
employee of the Netlink Subsidiaries covered by the TCI Plans, (ii)
reimbursements for matching contributions to 401(k) plans made with respect to
employees of the Netlink Subsidiaries and (iii) reimbursements for amounts paid
with respect to employees of the Netlink Subsidiaries under TCI's education
assistance program (collectively the "TCI Benefit Contributions"), the Netlink
Subsidiaries have no liability to TCI or any other party with respect to the TCI
Plans.
(b) Seller has furnished to Purchaser a copy of each of the Employee
Plans and related plan documents (including trust documents, insurance policies
or contracts, employee booklets, summary plan descriptions and other authorizing
documents, and, to the extent still in its possession, any material employee
communications relating thereto) and has, with respect to each Employee Plan
that is subject to ERISA reporting requirements, provided copies of the Form
5500, including all schedules attached thereto and actuarial reports, if any,
filed for the last three plan years. Any Employee Plan intended to be qualified
under Sections 401(a) or 501(c)(9) of the Code has either obtained from the
Internal Revenue Service a favorable determination letter as to its qualified
status under the Tax Reform Act of 1986 and subsequent legislation, or the time
for applying to the Internal Revenue Service for such a determination letter has
not expired under applicable Treasury Regulations. Seller has also furnished
Purchaser with the most recent Internal Revenue Service determination letter
issued with respect to each such Employee Plan (and nothing has occurred since
the issuance of each such letter which could reasonably be expected to cause the
loss of the tax-qualified status of any Employee Plan subject to Section 401(a)
of the Code), and all prohibited transaction exemptions (or requests for such
exemptions), private letter rulings, opinions, information letters or compliance
statements issued with respect to any Employee Plan by the Internal Revenue
Service, the Department of Labor or the Pension Benefit Guaranty Corporation.
(c) (i) None of the Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person; (ii) there has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, with respect to any Employee Plan, which could
reasonably be expected to have, in the aggregate, a Material Adverse Effect on
the Netlink Businesses taken as a whole; (iii) each Employee Plan has been
administered in accordance with its terms and in compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except as would not have a Material Adverse
Effect on the Netlink Subsidiaries taken as a whole, and the Netlink
Subsidiaries have performed all obligations required to be performed by them
under, are not in any respect in default under or violation of, and have no
knowledge of any default or violation by any other party to, any of the Employee
Plans, which failure to perform, default or violation could reasonably be
expected to have a Material Adverse Effect on the Netlink Businesses taken as a
whole; (iv) no Netlink Subsidiary is subject to any liability or penalty under
Sections 4976 through 4980 of the Code or Title I of
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ERISA with respect to any of the Employee Plans that has had a Material Adverse
Effect on any such parties; (v) all material contributions required to be made
by the Netlink Subsidiaries to any Employee Plan have been made on or before
their due dates and a reasonable amount has been accrued for contributions to
each Employee Plan for the current plan years; (vi) with respect to each
Employee Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the 30-day notice requirement has been
waived under the regulations to Section 4043 of ERISA) nor any event described
in Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) no Employee Plan
is covered by, and no Netlink Subsidiary has incurred or expects to incur any
liability under Title IV of ERISA or Section 412 of the Code. With respect to
each Employee Plan subject to ERISA as either an employee pension plan within
the meaning of Section 3(2) of ERISA or an employee welfare benefit plan within
the meaning of Section 3(1) of ERISA, each Netlink Subsidiary has prepared in
good faith and timely filed all requisite governmental reports (which were true
and correct as of the date filed) and has properly and timely filed and
distributed or posted all notices and reports to employees required to be filed,
distributed or posted with respect to each such Employee Plan except where the
failure to timely file, distribute or post such documents would not, in the
aggregate, have a Material Adverse Effect on the Netlink Businesses taken as a
whole. No suit, administrative proceeding, action or other litigation has been
brought, or to the knowledge of Seller, is threatened, against or with respect
to any such Employee Plan, including any audit or inquiry by the Internal
Revenue Service or United States Department of Labor. No Netlink Subsidiary is
a party to, or has made any contribution to or otherwise incurred any obligation
under, any "multiemployer plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Employee Plan, each Netlink Subsidiary has
complied with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
regulations thereunder and (ii) the applicable requirements of the Family and
Medical Leave Act of 1993 and the regulations thereunder, except to the extent
that such failure to comply would not, in the aggregate, have a Material Adverse
Effect on the Netlink Subsidiaries taken as a whole.
(e) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not (i) entitle any current or
former employee or other service provider or any director of any Netlink
Subsidiary to severance benefits or any other similar payment (including
unemployment compensation, golden parachute, bonus or otherwise), (ii) increase
any benefits otherwise payable or (iii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee, service
provider or director, except for the severance payments and "sticking bonuses"
that Seller has agreed to pay and be solely responsible for as contemplated by
Section 5.5.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by any Netlink Subsidiary relating to, or
change in participation or coverage under, any Employee Plan which would
materially increase the expense of maintaining such Employee Plan above the
level of expense incurred with respect to that Employee Plan for the most recent
fiscal year included in the Annual Financial Statements, except as a result of
the adoption and amendment of the 1998 Bonus Award Program described on Schedule
2.17 of the Seller Disclosure Schedule (the "Bonus Plan").
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2.18 Employee Matters. Schedule 2.18 of the Seller Disclosure
Schedule lists each employment, consulting, agency or commission agreement to
which any of the Netlink Subsidiaries is a party which is not terminable without
liability to the Netlink Subsidiaries upon 60 days' or less prior notice to the
employee, consultant or agent and involves compensation or remuneration of more
than $50,000 per annum. True and complete copies of such agreements have been
made available to Purchaser. All of such contracts and arrangements are in
full force and effect, and neither the Netlink Subsidiaries nor, to the
knowledge of Seller, any other party is in default under them. To the knowledge
of Seller, (i) there have been no claims of defaults and (ii) there are no facts
or conditions which if continued, or on notice, will result in a default under
these contracts or arrangements. There is no pending or, to the knowledge of
Seller, threatened labor dispute, strike, or work stoppage that would have a
Material Adverse Effect on the Netlink Businesses taken as a whole. Each
Netlink Subsidiary is in compliance in all material respects with all current
applicable laws and regulations respecting employment, discrimination in
employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, and are not engaged in any unfair
labor practice. There are no pending claims against any Netlink Subsidiary under
any workers compensation plan or policy or for long term disability.
2.19 Interested Party Transactions. Schedule 2.19 of the Seller
Disclosure Schedule lists all transactions between any Netlink Subsidiary on the
one hand and TCI, Seller, any of their respective subsidiaries (other than any
other Netlink Subsidiary and other than Purchaser and its subsidiaries) or any
director or executive officer of any of the Netlink Subsidiaries on the other
hand in which the amount involved exceeds $60,000 that would be required to be
disclosed pursuant to Item 404 of Regulation S-K under the Securities Act or the
Exchange Act if the Netlink Businesses were a single registrant registered under
Section 12(g) of the Exchange Act, other than transactions pursuant to the
contracts listed on the Seller Disclosure Schedule in accordance with their
respective terms. No Netlink Subsidiary is indebted to TCI, Seller, any of
their respective subsidiaries (other than Purchaser and its subsidiaries), or
any director, officer, employee or agent of any of the Netlink Subsidiaries for
borrowed money.
2.20 Insurance. The Netlink Subsidiaries, through one or more
affiliates, have the benefit (through TCI, Seller or otherwise) of policies of
fire and casualty, liability and other forms of insurance (including self
insurance) in such amounts, with such deductibles and against such risks and
losses as are, in Seller's judgment, reasonable for the operation of the
businesses of the Netlink Subsidiaries under the circumstances in which they are
being conducted. All such policies are in full force and effect, all premiums
due and payable thereon as of the date hereof, have been paid (other than
retroactive or retrospective premium adjustments that may be required to be paid
with respect to any period ending prior to the date hereof under comprehensive
general liability and workmen's compensation insurance policies), and no notice
of cancellation or termination has been received with respect to any such policy
which policy has not been replaced prior to the date of such cancellation. To
the knowledge of Seller, the activities and operations of the Netlink
Subsidiaries have been conducted in a manner so as to conform in all material
respects to all applicable provisions of such insurance policies, except for any
failures so to conform that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Netlink
Businesses taken as a whole. The coverage of such policies will cease upon the
applicable Closing, but the
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Netlink Subsidiaries will continue to be entitled to the benefit of such
policies with respect to any covered event that occurs prior to the Closing.
2.21 Major Customers. Schedule 2.21 of the Seller Disclosure Schedule
lists each customer of the Netlink Subsidiaries that individually accounted for
more than ten percent of the total dollar amount of revenues of the Netlink
Businesses on a combined basis in either of the two most recent fiscal years,
showing the total dollar amount of revenues for each such customer during each
such year. Seller has not received written notice from any customer listed in
such Schedule 2.21 of such customer's intent not to remain a customer of the
Netlink Subsidiaries after the Closing.
2.22 Suppliers and Broadcast Stations. Netlink USA either has the
valid consent of each broadcast station that is included within the "Denver 6"
or such consent is not required for retransmission of such station's signals.
As of the date hereof, except as contemplated by the SHVA Agreement no broadcast
station included within the "Denver 6" with which any Netlink Subsidiary has an
agreement or consent for retransmission has given notice to Seller or any
Netlink Subsidiary of such station's intent to change the terms upon which it
consents to the retransmission of its signal or to cease permitting the Netlink
Subsidiaries to retransmit such signal.
2.23 Minute Books. Seller has made available to Purchaser true and
complete copies of the minute books of the Netlink Corporations. Such minute
books contain summaries of all meetings of directors and shareholders or actions
by written consent since the later of (i) April 1, 1996 and (ii) the time of the
applicable entity's date of incorporation, and such summaries are true and
complete in all material respects and reflect all transactions referred to in
such minutes accurately in all material respects.
2.24 Brokers' and Finders' Fees. Neither Seller nor any Netlink
Subsidiary has incurred, or will incur, directly or indirectly, any liability
for brokerage or finders' fees or agents' commissions or investment bankers'
fees or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.25 Disclosure. None of the representations or warranties made by
Seller herein or in the Seller Disclosure Schedule, when read together in their
entirety, contain any untrue statement of a material fact, or omit to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
Seller has provided or made available to Purchaser all written information and
materials in Seller's possession requested by Purchaser or its counsel regarding
the negotiations for the SHVA Agreement, other than superseded drafts of
agreements.
2.26 Programming Supply and Affiliation Agreements. Telluride and
Satellite Services, Inc. ("SSI") have entered into programming supply and
affiliation agreements setting forth the basis upon which the satellite master
antenna television services business operated by the Netlink Subsidiaries will
be provided programming by SSI following the Closing and of the basis upon which
SSI purchases the "Denver 6" service from the Netlink Subsidiaries, such basis,
in each case, being on the same terms as those on which such services were,
during the first quarter of 1998,
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provided by SSI to the Netlink Subsidiaries or provided by the Netlink
Subsidiaries to SSI, as applicable (except, in each case, that either party had
the right to terminate the provision or use of such services at any time). True
and complete copies of such agreements have been provided to Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as disclosed in the Commission Filings (as defined herein)
filed and publicly available prior to April 1, 1998, Purchaser represents and
warrants to Seller as follows:
3.1 Organization. Each of Purchaser and Purchaser's "significant
subsidiaries" (as defined in Rule 1-02 of Regulation S-X of the Rules and
Regulations of the Commission) (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and (iii) is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing is not reasonably likely to have a
material adverse effect on the business, assets, results of operations or
financial condition of Purchaser and its subsidiaries taken as a whole.
Purchaser has no investment accounted for by the equity method that is material
to the business, assets, results of operations or financial condition of
Purchaser and its subsidiaries taken as a whole. Each entity in which
Purchaser, directly or through one or more of its subsidiaries, has an
investment accounted for by the equity method (an "Equity Affiliate") (A) is a
corporation or partnership duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, (B) has
all requisite corporate or partnership power and authority to own, lease and
operate its properties and to carry on its business as it is now being conducted
and (C) is duly qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it, or the
nature of its activities, makes such qualification necessary, except in each
case where such failure to be so existing and in good standing or to have such
power and authority or to be so qualified to do business and be in good standing
has not had and is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Purchaser and its subsidiaries taken as
a whole.
3.2 Corporate Power, Authorization and Validity of Agreement. This
Agreement has been duly executed and delivered by Purchaser. Purchaser has all
requisite corporate power and authority to enter into this Agreement and has all
requisite corporate power and authority to perform its obligations hereunder and
to consummate the transactions contemplated hereby. Subject to the satisfaction
of the conditions set forth in Article VI, the execution, delivery and
performance by Purchaser of this Agreement and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on its part; and this Agreement is a valid and binding
obligation of Purchaser, enforceable in accordance with its terms (except
insofar as
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enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
3.3 Capitalization of Purchaser. The authorized capital stock of
Purchaser consists of 60,000,000 shares of Class A Common Stock, par value $.01
per share ("Class A Common Stock"), 30,000,000 shares of Class B Common Stock,
and two million shares of Preferred Stock, par value $.01 per share ("Preferred
Stock"), of which there were issued and outstanding as of the close of business
on December 31, 1997, 24,420,120 shares of Class A Common Stock and 12,373,294
shares of Class B Common Stock and no shares of Preferred Stock. There are no
other outstanding shares of capital stock or other securities or ownership
interests of Purchaser other than shares of Class A Common Stock issued after
December 31, 1997, upon the exercise of options issued under Purchaser's Equity
Incentive Plan and its Stock Option Plan for Non-Employee Directors
(collectively, the "Purchaser Stock Option Plans"). All outstanding shares of
Purchaser have been duly authorized, validly issued, fully paid and are non-
assessable and free and clear of any Lien or Restriction, except Liens or
Restrictions created by or imposed upon the holders thereof. As of December 31,
1997, Purchaser has reserved (i) 1,176,444 shares of Class A Common Stock for
issuance upon exercise of outstanding options issued pursuant to the Purchaser
Stock Option Plans and (ii) 2,031,671 shares of Class A Common Stock for
issuance upon exercise of stock options available for grant under the Purchaser
Stock Option Plans. Other than stock appreciation rights related to
subsidiaries or divisions of Purchaser that Purchaser has the option to satisfy
in shares of Class A Common Stock, the adoption of any employee incentive or
stock option plan subsequent to December 31, 1997 that is approved by the
stockholders of Purchaser, the grant subsequent to December 31, 1997 of options
pursuant to such plans or pursuant to the Purchaser Stock Option Plans and other
than this Agreement or shares of Class B Common Stock that may be converted to
shares of Class A Common Stock, there are no other subscriptions, options,
warrants, puts, calls, rights, exchangeable or convertible securities or other
commitments or agreements of any nature relating to the capital stock or other
securities or ownership interests of Purchaser, or otherwise obligating
Purchaser to issue, transfer, deliver, sell, repurchase, redeem or otherwise
acquire, or cause to be issued, transferred, delivered, sold, repurchased,
redeemed or otherwise acquired, any shares of the capital stock or any phantom
shares, phantom equity interests or stock or equity appreciation rights, or
other ownership interests of Purchaser or obligating Purchaser to grant, extend
or enter into any such option, warrant, call, right, commitment or agreement.
The UVSG Shares to be issued pursuant to this Agreement will, when issued, be
duly authorized, validly issued, fully paid, and non-assessable and free and
clear of any Liens and not subject to any Restrictions (other than any
restrictions on transfer arising under the Securities Act or state securities
laws).
3.4 Purchaser Reports and Financial Statements. Purchaser has
heretofore made available to Seller true and complete copies of all reports,
registration statements, definitive proxy statements and other documents (in
each case together with all amendments thereto) filed by Purchaser with the
Commission since December 31, 1996 and Purchaser agrees to make available to
Seller true and complete copies of all reports, registration statements,
definitive proxy statements and other documents (in each case together with all
amendments thereto) filed by Purchaser with the Commission after the date hereof
and prior to the Closing Date (such reports, registration statements, definitive
proxy statements and other documents, together with any amendments thereto, are
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sometimes collectively referred to as the "Commission Filings"). The
Commission Filings constitute all of the documents (other than preliminary
material) that Purchaser was required to file with the Commission since December
31, 1996. As of their respective dates, each of the Commission Filings complied
and, in the case of filings after the date hereof will comply, in all material
respects with the applicable requirements of the Securities Act, the Exchange
Act and the rules and regulations under each such Act, and none of the
Commission Filings contained as of such date any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. When filed with the Commission, the
financial statements included in the Commission Filings complied as to form in
all material respects with the applicable rules and regulations of the
Commission and were prepared in accordance with GAAP consistently applied
(except as may be indicated therein or in the notes or schedules thereto), and
such financial statements fairly present the consolidated financial position of
Purchaser and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments. Except as and to
the extent reflected or reserved against in the financial statements included in
Purchaser's Annual Report on Form 10-K for the year ended December 31, 1997,
none of Purchaser or any of its subsidiaries or, to the knowledge of Purchaser,
any Equity Affiliate had as of such date any liability or obligation of any kind
required to be reflected on a balance sheet of Purchaser and its consolidated
subsidiaries prepared in accordance with the applicable rules and regulations of
the Commission which was material to the business, assets, results of operations
or financial condition of Purchaser and its subsidiaries taken as a whole.
Except as disclosed in the Commission Filings filed with the Commission prior to
the date hereof, none of Purchaser, Purchaser's subsidiaries or, to Purchaser's
knowledge, any Equity Affiliate has any actual or potential liability or
obligation of any kind (whether due or to become due, whether absolute, accrued,
fixed or contingent or otherwise) which, in any case or in the aggregate, is or
may be material to the business, assets, results of operations or financial
condition of Purchaser and its subsidiaries taken as a whole, except liabilities
and obligations that arose since December 31, 1997 in the ordinary course of
business.
3.5 No Approvals or Notices Required; No Conflict with Instruments.
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, (a) conflict with or violate any
provision of the Certificate of Incorporation or Bylaws of Purchaser, or
equivalent charter documents of any of its subsidiaries or, to Purchaser's
knowledge, any Equity Affiliate, (b) violate or conflict with any permit, order,
license, decree, judgment, statute, law, ordinance, rule or regulation
applicable to Purchaser or any of its subsidiaries or, to Purchaser's knowledge,
any Equity Affiliate or the properties or assets of Purchaser or any of its
subsidiaries or to Purchaser's knowledge, any Equity Affiliate, or (c) result in
any breach or violation of, or constitute a default (with or without notice or
lapse of time, or both) under, or give rise to any right of termination,
cancellation or acceleration of, or result in the creation of any Lien on any of
the properties or assets of Purchaser or any of its subsidiaries or, to
Purchaser's knowledge, any Equity Affiliate pursuant to, or require any Contract
Consent of any party to, any mortgage, indenture, lease, contract or other
agreement or instrument, bond, note, concession or franchise applicable to
Purchaser or any of its subsidiaries or to Purchaser's knowledge, any Equity
Affiliate or their properties or assets, except, in the case of clauses (b) and
(c) only, where such conflict, violation,
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default, termination, cancellation, acceleration, Lien or lack of consent would
not have and is not reasonably likely to have a Material Adverse Effect on
Purchaser and its subsidiaries taken as a whole or to prevent consummation of
the transactions contemplated hereby. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Purchaser or any of its subsidiaries or
to Purchaser's knowledge, any Equity Affiliate in connection with the execution
and delivery of this Agreement by Purchaser or the consummation by Purchaser of
the transactions contemplated hereby, except for (i) the filing with the
Commission and the National Association of Securities Dealers, Inc. ("NASD") of
the proxy statement to be sent to the stockholders of Purchaser in connection
with the meeting of Purchaser's stockholders (the "Purchaser Stockholders
Meeting") to consider the transactions contemplated hereby (such proxy statement
as amended or supplemented is referred to herein as the "Proxy Statement"), (ii)
the filing of a Form 8-K as required under the Exchange Act, (iii) any filings
as may be required under applicable state securities laws and the securities
laws of any foreign country, and (iv) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on Purchaser and its subsidiaries taken as a
whole and would not prevent or materially alter or delay any of the transactions
contemplated by this Agreement. None of Purchaser or its subsidiaries is or
will be required to give any Contract Notice to any party to any material
mortgage, indenture, lease, contract or other agreement or instrument, bond,
note, concession or franchise applicable to any of Purchaser's or its
subsidiaries' properties or assets in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby.
3.6 Absence of Certain Changes or Events. Since December 31, 1997, there
has not been any material adverse change in, and no event has occurred and no
condition exists which, individually or together with other events or
conditions, has had or, insofar as Purchaser can reasonably foresee, is
reasonably likely to have, a Material Adverse Effect on Purchaser (excluding
events or conditions generally affecting the cable television industry or
satellite television industry in the United States or affecting general business
or economic conditions in the United States).
3.7 Information. Purchaser has been afforded the opportunity to review
prior to the date hereof written materials that Seller has made available to
Purchaser pursuant to this Agreement on or prior to the date hereof. Purchaser
acknowledges that Seller has afforded Purchaser the opportunity to make
inquiries and obtain additional information from Seller and its representatives
and advisors. Based upon its own investigation and upon information provided by
Seller, Purchaser has analyzed the potential effects that could result from an
SHVA Agreement and has relied on its own tax, legal, financial and regulatory
advisers with regard to all matters relating to the SHVA Agreement and not on
any advice or recommendation of Seller.
3.8 Brokers' and Finders' Fees. Except for the engagement of Paine Webber
Incorporated as contemplated by Section 3.12, the fees and expenses of which
shall be borne by Purchaser, Purchaser has not incurred, and will not incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' fees or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
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3.9 Investment. Purchaser or its advisors have such knowledge and
experience in financial and business matters to be capable of evaluating the
merits of the purchase of the Purchased Shares. Purchaser is purchasing the
Purchased Shares for investment for its own account, and not with a view to the
distribution, transfer or resale thereof in violation of the Securities Act, or
any applicable state securities law and Purchaser does not have any contract,
understanding, agreement or arrangement to dispose of the Purchased Shares.
3.10 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Purchaser, threatened
against Purchaser or any of its subsidiaries or Equity Affiliates or any of
their assets and properties or any of their officers or directors (in their
capacities as such) that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Purchaser and its subsidiaries
taken as a whole. There is no judgment, decree or order against Purchaser or
any of its subsidiaries or any of their respective directors or officers (in
their capacities as such), that could prevent consummation of the transactions
contemplated by this Agreement, or that could have a Material Adverse Effect on
Purchaser and its subsidiaries taken as a whole.
3.11 Disclosure. None of the representations or warranties made by
Purchaser herein contain any untrue statement of a material fact, or omit to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
3.12 Fairness Opinion. Purchaser has received a written opinion of
Paine Webber Incorporated satisfactory in form, scope and substance to Purchaser
to the effect that the 6,375,000 shares of Class B Common Stock to be issued by
Purchaser to Seller in exchange for 100% of the capital stock of each of LMC
Netlink, Westlink and Telluride (giving effect to the Netlink Restructuring) are
fair from a financial point of view to the holders of the capital stock of
Purchaser other than TCI and its subsidiaries.
3.13 Tax-Free Transaction. Purchaser has not taken any action and has
no present plan or intention to take any action which would cause the exchange
of the Purchased Shares for UVSG Shares not to qualify as a tax-free transaction
pursuant to Section 351 of the Code.
3.14 Licenses; Compliance with Regulatory Requirements; Intangible
Property. Purchaser, its subsidiaries and, to the knowledge of Purchaser, its
Equity Affiliates hold all Licenses which are material to the operation of the
businesses of Purchaser and its subsidiaries taken as a whole ("Purchaser
Licenses"). Each of Purchaser, its subsidiaries and, to the knowledge of
Purchaser, its Equity Affiliates is in compliance with, and has conducted its
business so as to comply with, the terms of the respective Purchaser Licenses
and with all applicable laws, rules, regulations, ordinances and codes, domestic
or foreign, including Environmental and Health Laws, except where the failure so
to comply has not had and, insofar as reasonably can be foreseen, in the future
will not have, either individually or in the aggregate, a Material Adverse
Effect on Purchaser and its subsidiaries taken as a whole. Without limiting the
generality of the foregoing, Purchaser, its subsidiaries and, to the knowledge
of Purchaser, its Equity Affiliates (i) have all FCC Licenses and
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permits required for the operation of the facilities being operated on the date
hereof by Purchaser, any of its subsidiaries or, to the knowledge of Purchaser,
its Equity Affiliates, (ii) have duly and currently filed all reports and other
information required to be filed by the FCC or any other Governmental Entity in
connection with such FCC Licenses and Permits and (iii) are not in violation of
any of such FCC Licenses or Permits, other than the lack of FCC Licenses or
Permits, delays in filing reports or possible violations which have not had and,
insofar as can reasonably been foreseen, in the future will not have a Material
Adverse Effect on Purchaser and its subsidiaries taken as a whole. Purchaser
and its subsidiaries own or have adequate rights to use all patents, trademarks,
trade names, service marks, trade secrets, copyrights and other proprietary
intellectual property rights as are material in connection with the businesses
of Purchaser and its subsidiaries taken as a whole.
3.15 Tax Matters.
(a) Each of Purchaser and its subsidiaries has duly and timely filed
all returns and reports with respect to Taxes required to be filed by it for all
taxable years or portions thereof. Such Tax Returns and reports have been
prepared in accordance with all applicable government regulations and are
accurate and complete in all material respects. Each of Purchaser and its
subsidiaries, as applicable, have each timely paid or adequately provided for
all Taxes due and payable in respect to any transaction for which Taxes are due
or any Taxes chargeable against its or their revenue, assets or income (whether
or not shown on any Tax Returns), and each of Purchaser and its subsidiaries
have adequately provided for all Taxes which would be due if the current taxable
year ended at the close of business on the Closing Date.
(b) There are no recorded Liens for Taxes upon any of the material
assets of Purchaser or its subsidiaries except Liens for current Taxes not due
or Liens that are being contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set aside on
the books of Purchaser or the applicable subsidiary.
(c) No material proposed Taxes or Tax deficiencies have been asserted,
and no proceedings with respect to Taxes have been commenced, against Purchaser
or any of its subsidiaries. None of Purchaser or its subsidiaries has waived any
statute of limitation in respect of any Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency, except for an extension with
respect to New York State through December 31, 1998 for tax periods from 1993
through 1996.
(d) None of Purchaser or its subsidiaries has filed, and none will
file, at any time prior to the Closing, a consent under Section 341(f) of the
Code.
3.16 Management of SNG. Prior to the date hereof, Purchaser has been
managing SNG in the ordinary course of business consistent with past practice
and has caused SNG to make cash distributions to its members on a regular basis
consistent with past practice.
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ARTICLE IV
CONDUCT PENDING THE CLOSING
It is expressly understood and agreed by the parties that Seller is not
making any covenants or agreements in this Article IV or in any other part of
this Agreement with respect to matters relating to SNG, including, without
limitation, its condition (financial or otherwise), assets, liabilities,
business, operations, results of operations, customers, management, employees or
prospects.
4.1 Conduct of Business of the Netlink Subsidiaries. Except as
otherwise provided in this Agreement, Seller acknowledges that upon Closing
Purchaser will be entitled to the benefits of the operation of the Netlink
Businesses and cash distributions from SNG with respect to the period from April
1, 1998 through the Closing Date. Except as otherwise provided in this
Agreement, Purchaser acknowledges that upon Closing Purchaser will be subject to
all the risks and burdens of the operations of the Netlink Businesses with
respect to the same period. Seller will cause the Netlink Businesses to be
operated in the ordinary course consistent with past practice, except that,
effective April 1, 1998, instead of the customary practice of distributing to
Seller all cash generated by such businesses and not used in the payment of
expenses, Seller shall cause the Netlink Subsidiaries to retain such cash for
their own use pending the Closing. Nothing contained herein shall be construed
to prevent the Netlink Subsidiaries (a) from paying amounts due to Seller and
its affiliates in the ordinary course of business that do not constitute
dividends, distributions or advances (other than as provided in clause (ii)
below and as permitted by Section 4.1(b)(xv)), which permitted payments shall
include (i) payment of the TCI Benefit Contributions and (ii) payment of an
allocable portion of Seller's overhead expenses consistent with past practice or
(b) from making distributions with respect to tax liabilities as contemplated by
Section 4.1(b)(vii). During the period prior to the Closing Date, Seller shall
cause the management and employees of the Netlink Subsidiaries to comply with
all reasonable requests of Purchaser or its designated representatives with
respect to the operation of the Netlink Businesses; provided, that neither
Seller nor the Netlink Subsidiaries shall be required to take any action
that would impair its ability to perform any of its covenants made in this
Agreement (unless such performance is expressly waived by Purchaser) or to
obtain any consents, authorizations or approvals required in connection with the
transactions contemplated hereby.
(a) Affirmative Covenants. In addition, after the date hereof and prior
to the Closing, except for the Netlink Restructuring, the Primestar Transaction
and as otherwise expressly contemplated by this Agreement or with the consent of
Purchaser (which consent will not be unreasonably withheld), Seller will cause
each of the Netlink Subsidiaries to:
(i) use commercially reasonable efforts in the ordinary and usual
course of business and consistent with past practice to preserve intact its
present business organizations, keep available the services of its present
officers and key employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, to the end that its goodwill and ongoing businesses shall
be unimpaired at
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the Closing, except that nothing contained herein shall obligate Seller to
take or cause any Netlink Subsidiary to take any action inconsistent with
its covenants in Section 4.1(b);
(ii) notify Purchaser of the occurrence of any event that is not in
the ordinary course of business or that is reasonably likely to have a
Material Adverse Effect on the Netlink Businesses taken as a whole;
(iii) use commercially reasonable efforts to actively and diligently
pursue the Application to the Canadian Radio-television and
Telecommunications Commission (the "CRTC") by the Battlefords Community
Cablevision Cooperative dated September 15, 1997, requesting that the CRTC
allow certain Canadian broadcasting licensees to distribute, at their
option, as part of their basic service, five of the programming services
received via satellite from the Netlink Businesses; and
(iv) if requested by Purchaser in writing prior to June 1, 1998,
use commercially reasonable efforts to extend to December 31, 2000 the
SATCOM F1R/C-1 Satellite Transponder Service Agreement, dated as of
November 29, 1989 (the "GE Transponder Agreement"), between GE American
Communications, Inc. and Western Tele-Communications, Inc. ("WTCI"), which
has been assigned to Netlink USA pursuant to an Assignment and Assumption
Agreement, dated October 1, 1991 (and will be assigned to Telluride in the
Netlink Restructuring), pursuant to the terms of the GE Transponder
Agreement.
(b) Negative Covenants. Further, after the date hereof and prior to the
Closing, except for the Netlink Restructuring, the Primestar Transaction and as
otherwise expressly contemplated by this Agreement or with the consent of
Purchaser (which consent will not be unreasonably withheld), Seller will cause
each of the Netlink Subsidiaries not to:
(i) cause or permit any amendments to its Certificate or Articles
of Incorporation or Bylaws or equivalent charter documents;
(ii) adopt any employee benefit, stock purchase or option plan for
the benefit of the employees of the Netlink Subsidiaries or amend any
Employee Plan or accelerate, amend or change the period of exercisability
or vesting of options or other rights granted under its Employee Plans or
authorize cash payments in exchange for any options or other rights granted
under any of such plans, except, in each case, to the extent required by
any applicable law or the existing terms of such Employee Plan or by the
provisions of this Agreement; provided, that nothing in this paragraph
shall restrict TCI, Seller or any of their respective subsidiaries other
than the Netlink Subsidiaries from taking any of the above actions other
than with respect to a plan which covers only employees of the Netlink
Subsidiaries;
(iii) make any capital expenditures that individually or in the
aggregate exceed the amount provided therefor in the 1998 Capital Budget;
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(iv) other than acquisitions in existing or related lines of
business of the entity making such acquisition not exceeding $100,000 in
the aggregate, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets that are material, individually or in the
aggregate, to the Netlink Businesses taken as a whole (it being understood
that any acquisition that would constitute a capital expenditure within the
meaning of the 1998 Capital Budget shall be subject to the provisions of
clause (v) of this Section and not to this clause (vi));
(v) commence a lawsuit other than (A) for the routine collection of
bills or (B) in such cases where it in good faith determines that failure
to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Purchaser prior to
the filing of such a suit;
(vi) sell, lease or otherwise transfer or dispose of any of its
assets of substantial value;
(vii) declare, set aside, or pay any dividend or other distribution
to Seller, or directly or indirectly redeem, retire, purchase or otherwise
acquire any of its capital stock or other securities or options, warrants
or other rights to acquire its capital stock, provided that, immediately
prior to the Closing (or, if applicable, the Initial Closing and the Second
Closing), the Netlink Subsidiaries shall pay to Seller an amount in cash
equal to the estimated amount of taxes accrued on the earnings of the
Netlink Subsidiaries during the period beginning on April 1, 1998 through
and including the Closing Date (or, if applicable, in the case of the
Initial Closing, for the period from April 1, 1998 through and including
the Initial Closing Date and, in the case of the Second Closing, for the
period from the Initial Closing Date through and including the Second
Closing Date) based on an effective combined federal, state and local tax
rate of (x) 20% to the extent that such taxable earnings of the Netlink
Subsidiaries reduce the amount of the excess loss accounts that Seller
would otherwise be responsible for under Section 9.3(a) or clause (ii) of
Section 9.7(a) and (y) 40% of any additional taxable earnings (the
"Estimated Tax Payment");
(viii) modify or change in any material respect any material contract,
other than in the ordinary course of business;
(ix) revalue any of its assets, including without limitation writing
down the value of any assets or writing off notes or accounts receivable,
except as required by GAAP;
(x) create any Lien on any of its asset other than Permitted
Encumbrances;
(xi) waive in writing or release in writing any right or claim of
substantial value;
(xii) pay, discharge or satisfy claims, liabilities or obligations,
other than in the ordinary course of business consistent with past
practice;
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(xiii) issue or sell any of its capital stock or other securities or
membership or other ownership interests, exchangeable or convertible
securities, options, warrants, puts, calls or other rights to acquire
capital stock or other securities or other ownership interests of any of
the Netlink Corporations or Netlink USA;
(xiv) incur any indebtedness for borrowed money or assume or
guarantee any such indebtedness other than in the ordinary course of
business and consistent with past practice;
(xv) other than as contemplated or otherwise permitted by this
Agreement and other than in accordance with its normal cash management
practices conducted in the ordinary and usual course of its business and
consistent with past practice, make any advance or loan to or engage in any
transaction with any director, officer, or affiliate (other than any other
Netlink Subsidiary and other than Purchaser or any of its subsidiaries) of
such Netlink Subsidiary not required by the terms of an existing contract
described on the Seller Disclosure Schedule;
(xvi) enter into any new employment, consulting, agency or commission
agreement, make any amendment or modification to any existing such
agreement or grant any increases in salary, wage, benefit or other
remuneration payable or to become payable to any of its current or former
officers, directors, employees or agents or grant any increases in any
bonus or severance payment or arrangement made to, for or with any of its
officers, directors, employees or agents or grant any supplemental
retirement plan or program or special remuneration for any of its officers,
directors, employees or agents, in each case, (x) other than in the
ordinary course of business and consistent with past practice (including
regular salary and performance bonus increases) or (y) which do not, in the
aggregate, materially increase the compensation or benefit expense of the
Netlink Subsidiaries taken as a whole; and the parties agree that nothing
in this paragraph or elsewhere in this Agreement shall prevent the Netlink
Subsidiaries from entering into agreements for temporary employment of
personnel substantially in the form previously provided to Purchaser by
Seller; or
(xvii) enter into an agreement to do any of the foregoing.
4.2 No Solicitation; Acquisition Proposals. Seller will not, and Seller
will cause each of the Netlink Subsidiaries not to, directly or indirectly,
through any officer, director, employee, representative, agent, financial
advisor or otherwise, solicit, initiate or encourage inquiries or submission of
proposals or offers from any person (other than Primestar) relating to any sale
of all or any portion of the assets, business, properties of (other than
immaterial or insubstantial assets or inventory in the ordinary course of
business), or any equity interest in, any Netlink Subsidiary or any business
combination with any of the Netlink Subsidiaries whether by merger, purchase of
assets, tender offer or otherwise or participate in any negotiation regarding,
or furnishing to any other person (other than Primestar) any information with
respect to, or otherwise cooperate in any way with, or assist in, facilitate or
encourage, any effort or attempt by any other person to do or seek to do any of
the foregoing. Seller will vote all shares of voting stock in the Netlink
Corporations held by Seller against any transaction of the nature described in
this Section 4.2 that is presented to it. Seller will notify Purchaser
immediately if any inquiries or proposals are received by, any
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information is requested from, or any negotiations or discussions are sought to
be initiated or continued with Seller or any Netlink Subsidiary, in each case in
connection with any of the foregoing. Seller shall use its best efforts to
cause all confidential materials previously furnished to any third parties in
connection with any of the foregoing to be promptly returned to Seller and shall
cease, or cause the Netlink Subsidiaries to cease, any negotiations conducted in
connection therewith.
4.3 Proxy Statement. To the extent information regarding Seller or the
Netlink Subsidiaries is required to be included in the Proxy Statement, Seller
hereby agrees to promptly supply such information to Purchaser upon request.
Seller further agrees that the information so supplied shall not contain any
statement which, at the time of delivery, is false or misleading with respect to
any material fact, or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they are
made, not false or misleading. Seller further agrees promptly to supply such
additional information to Purchaser as may be necessary to correct any statement
or omission regarding the Netlink Subsidiaries included in the Proxy Statement
that becomes false or misleading with respect to any material fact prior to the
Closing Date.
4.4 Notice of Breach. Each party hereto shall promptly give written
notice to the other upon becoming aware of the occurrence or, to its knowledge,
impending or threatened occurrence, of any event that is reasonably likely to
cause or constitute a breach of any of its representations, warranties or
covenants hereunder.
4.5 Restructuring. Promptly following the execution and delivery of the
Primestar Agreement, Seller shall use its commercially reasonable efforts to
cause the Netlink Restructuring to be effected. After giving effect to the
Netlink Restructuring, Telluride will own all of the assets and liabilities of
the Netlink Corporations and Netlink USA other than the Excluded Assets and
Liabilities and any ownership interest in Netlink USA.
ARTICLE V
OTHER COVENANTS
5.1 Access to Information. Upon reasonable notice, and subject to the
terms and conditions hereof, Seller will, and will cause each of the Netlink
Subsidiaries to, subject to the waiver of confidentiality obligations of TCI,
Seller or the Netlink Subsidiaries to third parties, afford Purchaser and its
accountants, counsel and other representatives full access during normal
business hours (and at such other times as the parties hereto agree) during the
period prior to the Closing to (a) all of Seller's properties, books, contracts,
commitments and records relating to the Netlink Subsidiaries, (b) all
properties, books, contracts, commitments and records of the Netlink
Subsidiaries, and (c) all other information in the possession of Seller or the
Netlink Subsidiaries concerning the business, properties and personnel of the
Netlink Subsidiaries as Purchaser may reasonably request. Seller will provide,
and will cause each of the Netlink Subsidiaries to provide, to Purchaser and its
accountants, counsel and other representatives copies of any interim quarterly
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financial statements for the Netlink Wholesale Division prepared prior to the
Closing Date promptly upon request. Purchaser shall cooperate with Seller in
Seller's due diligence review of Purchaser to the extent necessary to confirm
the accuracy of Purchaser's representations and warranties. No information or
knowledge obtained in any investigation pursuant to this Section 5.1 shall
affect or be deemed to modify any representation or warranty contained herein or
the conditions to the obligations of the parties hereto to consummate the
transactions contemplated hereby.
5.2 Confidentiality. Purchaser agrees to treat as confidential and hold
in confidence all information provided by Seller or the Netlink Subsidiaries in
connection with the transactions contemplated by this Agreement concerning the
businesses and affairs of the Netlink Subsidiaries or Seller, and Seller agrees
to treat as confidential and hold in confidence all information provided by
Purchaser in connection with the transactions contemplated by this Agreement
concerning the businesses and affairs of Purchaser, in each case, in accordance
with the Nondisclosure Agreement, effective as of January 28, 1998, between
Purchaser and Seller (the "Nondisclosure Agreement").
5.3 Publicity. Each of Purchaser and Seller agrees not to, and to cause
each of its respective subsidiaries not to, issue, or cause or permit to be
issued, any press release regarding this Agreement and the transactions
contemplated hereby without consulting with the other party prior to making such
release.
5.4 Proxy Statement; Other Filings; Cooperation.
(a) As promptly as practicable after the date of this Agreement, Purchaser
shall prepare and file with the Commission a preliminary Proxy Statement in form
and substance reasonably satisfactory to each of Purchaser and Seller.
Purchaser shall use reasonable efforts to respond to any comments of the
Commission and to cause the definitive Proxy Statement to be filed with the
Commission and mailed to its stockholders at the earliest practicable time.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement, Purchaser shall promptly inform Seller of
such occurrence and shall file such amendment or supplement with the Commission
or its staff or any other applicable Government Entity, and shall use reasonable
efforts to mail such amendment or supplement to the stockholders of Purchaser at
the earliest practicable date. The Proxy Statement shall include the
recommendation of the Board of Directors of Purchaser in favor of the issuance
of the UVSG Shares. Purchaser shall call the Purchaser Stockholders Meeting to
be held as promptly as practicable for the purpose of voting upon the issuance
of the UVSG Shares.
(b) The parties hereto shall (i) in the case of Seller, timely give the
Contract Notices identified on the Seller Disclosure Schedule, (ii) make, and
cause their affiliates (other than each other) to make, all other necessary
filings with respect to the transactions contemplated hereby including
registrations and filings with all applicable Governmental Entities and filings
required under the Securities Act and the Exchange Act and the rules and
regulations thereunder, and under applicable Blue Sky or similar securities
laws, and shall use all reasonable efforts to obtain required approvals and
clearances with respect thereto and to (A) comply as promptly as practicable
with all governmental requirements applicable to the transaction and (B) obtain
promptly all necessary permits, orders and other consents of Governmental
Entities necessary for the consummation of the
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transactions contemplated hereby and (iii) use all commercially reasonable
efforts to obtain all Contract Consents identified on the Seller Disclosure
Schedule or otherwise necessary for the consummation of the transaction
contemplated hereby, and to take, or cause to be taken, all actions and to do,
or cause to be done, all other things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including using all commercially
reasonable efforts to lift any injunction or other legal bar to the transactions
contemplated hereby (and, in such case, to proceed with such transactions as
expeditiously as possible).
5.5 Employment Matters. Seller has assumed and shall be responsible for
(and Purchaser shall have no liability for) all obligations for severance
benefits (other than as provided below) and for the sticking bonuses described
in Item (1) of Schedule 2.17 of the Seller Disclosure Schedule, in each case
payable to the employees of the Netlink Subsidiaries. Immediately prior to the
Closing, all persons then employed by the Netlink Subsidiaries shall become
employees of Seller, so that immediately following the Closing the Netlink
Subsidiaries will have no employees. All liability for that portion of the
performance bonuses that have accrued pursuant to the Bonus Plan during the
period from and including January 1, 1998 through and including the Closing Date
with respect to employees of the Netlink Subsidiaries who are entitled to such
bonuses pursuant to the Bonus Plan shall be the liability of the Netlink
Subsidiaries and not Seller following the Closing (it being understood and
agreed that such performance bonuses will accrue on a nine-month (not twelve-
month) basis). Following the Closing through and until September 30, 1998,
Seller will, at Purchaser's request and subject to Purchaser's reimbursing
Seller for the costs thereof, make available to Purchaser the services of such
of the persons who prior to the Closing had been providing services exclusively
to the Netlink Subsidiaries and their businesses and who continue to be employed
by Seller thereafter as Purchaser may request (each, a "Requested Employee").
Purchaser shall reimburse Seller for all costs associated with the Requested
Employees during such period (including any accruals under the Bonus Plan with
respect to a Requested Employee during the period following the Closing through
and including September 30, 1998 or, if earlier, the date that Purchaser
notifies Seller that it no longer wants Seller to employ such Requested Employee
on behalf of Purchaser or the Netlink Subsidiaries); provided that Purchaser
shall not be required to reimburse Seller for severance benefits (other than the
accrued performance bonuses referred to above) or the sticking bonuses described
in Item (1) of Schedule 2.17 of the Seller Disclosure Schedule paid to such
employees. Reimbursement pursuant to this Section 5.5 shall be paid within 10
days of receipt of an invoice from Seller itemizing such reimbursable costs.
5.6 Tax-Free Transaction. Purchaser agrees not to take any action which
would cause the exchange of the Purchased Shares for the UVSG Shares not to
qualify as a tax-free transaction pursuant to Section 351 of the Code, including
if the Primestar Transaction is not consummated prior to the Closing (or the
Second Closing, if applicable), any direct or indirect transfer of the SNG
Shares or SNG Interest to Primestar after the Closing (or the Second Closing, if
applicable) if such transfer could have such effect.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Obligations of Each Party. The respective obligations
of each party hereto to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, by agreement of Purchaser and Seller:
(a) Stockholder Approvals. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite
vote of the stockholders of Purchaser.
(b) No Injunction. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect.
6.2 Additional Conditions to Obligations of Seller. Subject to Section
6.5, the obligations of Seller to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived, in writing, by Seller:
(a) Accuracy of Representations and Warranties; Performance of
Agreements. Purchaser shall have performed and complied in all material
respects with all of its covenants in this Agreement required to be
performed and complied with by it on or prior to the Closing and the
representations and warranties of Purchaser in this Agreement shall be true
and correct in all material respects (or in all respects in the case of any
representation or warranty that is qualified by its terms by a reference to
Material Adverse Effect or other concept of materiality) when made and on
and as of the Closing Date as though such representations and warranties
were made on and as of such date.
(b) Officers' Certificate. Seller shall have received a certificate
executed on behalf of Purchaser by its Chief Financial Officer certifying
that the conditions specified in Section 6.2(a) have been fulfilled.
(c) Contract Consents and Notices. All Contract Consents and
Contract Notices which are referred to in the Seller Disclosure Schedule or
otherwise required in connection with the consummation of the transactions
contemplated hereby and which, if not obtained or given, would have,
individually or in the aggregate, a Material Adverse Effect after the
Closing Date on Seller and its subsidiaries taken as a whole shall have
been obtained and given.
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(d) No Material Adverse Change. Since the date hereof no event
shall have occurred that, individually or in the aggregate, has had or is
reasonably likely to have, a Material Adverse Effect, as of or after the
Closing Date, on Purchaser and its subsidiaries taken as a whole,
excluding, in all cases, events or conditions generally affecting the cable
television or satellite television industries or affecting general business
or economic conditions.
(e) Receipt of Licenses, Permits and Consents. The parties hereto
shall have obtained from each Governmental Entity all approvals, waivers
and consents identified on the Seller Disclosure Schedule or otherwise
required in connection with the consummation of the transactions
contemplated hereby, and such approvals, waivers and consents, as
applicable, shall be in full force and effect, and all filings with
Governmental Entities, if any, as are required in connection with the
consummation of such transactions shall have been made, other than those
which, if not obtained, in force or effect or made (as the case may be),
would not, either individually or in the aggregate, have a Material Adverse
Effect, as of or after the Closing Date, on Seller and its subsidiaries
taken as a whole.
6.3 Additional Conditions to the Obligations of Purchaser. Subject to
Sections 6.4(b) and 6.5, the obligations of Purchaser to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, by Purchaser:
(a) Accuracy of Representations and Warranties; Performance of
Agreements. Seller shall have performed and complied in all material
respects with all of its covenants in this Agreement required to be
performed and complied with by it on or prior to the Closing Date. The
representations and warranties of Seller in this Agreement shall have been
true and correct in all material respects (or in all respects in the case
of any representation or warranty that is qualified by its terms by a
reference to Material Adverse Effect or other concept of materiality) when
made.
(b) Officers' Certificate. Purchaser shall have received a
certificate, dated as of the Closing Date, from Seller by its President
certifying that the conditions specified in Section 6.3(a) have been
fulfilled.
(c) Receipt of Licenses, Permits and Consents. The parties hereto
shall have obtained from each Governmental Entity all approvals, waivers
and consents, identified on the Seller Disclosure Schedule or otherwise
required in connection with the consummation of the transactions
contemplated hereby, and such approvals, waivers and consents, as
applicable, shall be in full force and effect, and all filings with
Governmental Entities, if any, as are required in connection with the
consummation of such transactions shall have been made, other than those
which, if not obtained, in force or effect or made (as the case may be),
would not, either individually or in the aggregate, have a Material Adverse
Effect, as of or after the Closing Date, on Purchaser and its subsidiaries
taken as a whole.
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(d) Contract Consents and Notices. All Contract Consents and
Contract Notices which are referred to in the Seller Disclosure Schedule or
otherwise required in connection with the consummation of the transactions
contemplated hereby and which, if not obtained or given, would have,
individually or in the aggregate, a Material Adverse Effect after the
Closing Date on Purchaser and its subsidiaries taken as a whole shall have
been obtained and given.
(e) Resignations. Purchaser shall have received letters of
resignation, effective as of the Closing Date, executed and tendered by
each of the then incumbent directors of the Netlink Corporations.
6.4 Primestar Transaction.
(a) If the Primestar Agreement is entered into prior to July 31,
1998, it shall be a condition to the respective obligations of each party
hereto to consummate the transactions to be effected at the Second Closing
(and if Seller does not elect to require an Initial Closing, the Closing),
that either the Primestar Transaction has been consummated or the Primestar
Agreement has been terminated in accordance with its terms.
(b) Notwithstanding Section 6.3, if the Primestar Transaction has
been consummated, Purchaser's obligations to purchase the Primestar Shares
shall not be subject to any conditions other than the conditions set forth
in Section 6.1.
6.5 Initial Closing. Notwithstanding Sections 6.2 and 6.3, if the Initial
Closing occurs, the respective obligations of Purchaser and Seller to consummate
the Second Closing shall not be subject to any conditions other than the
conditions set forth in Section 6.1 and Section 6.4(a) and, in the case of
Seller only, the condition that the representation and warranty of Purchaser in
Section 3.13 shall be true and correct on and as of the Second Closing as though
such representation and warranty were then being made and that Purchaser shall
have performed and complied with and not be in breach of its covenant in Section
5.6.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated, whether before or
after approval of the matters presented in connection with this Agreement by the
stockholders of Purchaser:
(a) at any time prior to the Closing Date, by mutual consent of
Purchaser and Seller;
(b) at any time prior to the Initial Closing (or if Seller has not
elected to require the Initial Closing, the Closing) by Purchaser, if
Seller shall have breached in any material respect any of its covenants in
Article IV or V or if Seller was in breach in any material
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respect (or in any respect in the case of any representation or warranty
that is qualified by its terms by a reference to Material Adverse Effect)
of any of its representations and warranties in Article II when made and,
in either case, such breach continues for a period of 30 days after notice
of the breach is given to Seller by Purchaser (provided that any such
breach of a representation or warranty in Article II shall be deemed cured
if as of the end of such 30 day period such representation or warranty
would be true if then made); provided, however, that if the Primestar
Transaction has been consummated, Purchaser may only exercise its right of
termination pursuant to this Section 7.1(b) with respect to its obligation
to purchase the Telluride Shares and this Agreement shall continue in full
force and effect with respect to the Primestar Shares;
(c) at any time prior to the Initial Closing (or if Seller has not
elected to require the Initial Closing, the Closing), by Seller, if
Purchaser shall have breached in any material respect any of its
representations, warranties or covenants in Article III, IV or V and such
breach continues for a period of 30 days after notice of the breach is
given to Purchaser by Seller; and
(d) at any time after September 30, 1998, by Seller, if without any
fault by it, the Initial Closing (or, if Seller shall not have elected to
require the Initial Closing, the Closing) shall not have occurred on or
before such date.
7.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of the parties hereto, except to
the extent that such termination results from the breach by a party hereto of
any of its representations, warranties or covenants set forth in this Agreement;
provided that, the provisions of this Section 7.2 and Article X shall remain in
full force and effect and survive any termination of this Agreement.
Notwithstanding the foregoing, if prior to termination of this Agreement
pursuant to Section 7.1 the Initial Closing has occurred, then the preceding
sentence shall not apply and the effect of such termination shall be as follows:
there shall be no liability or obligation on the part of the parties hereto
pursuant to this Agreement with respect to the SNG Shares or the Primestar
Shares, except to the extent that such termination results from the breach by a
party hereto of any of its representations, warranties or covenants set forth in
this Agreement; provided that, the provisions of this Section 7.2 and Article X
shall remain in full force and effect and survive any termination of this
Agreement.
7.3 Amendment. This Agreement may be amended at any time before or after
approval hereof by the stockholders of Purchaser; provided, however, that after
such stockholder approval there shall not be made any amendment that by law
requires further approval by the stockholders of Purchaser without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
7.4 Extension; Waiver. The parties may (a) extend the time for the
performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations and warranties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.3, waive compliance with any of the agreements or
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conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing, signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Seller.
(a) Subject to written notice of such claim for indemnification being
given to Seller within the appropriate survival period referred to in Section
10.1, Seller covenants and agrees, on the terms and subject to the limitations
set forth in this Agreement, to indemnify, defend and hold Purchaser harmless
from and against:
(i) all losses, damages, liabilities, deficiencies, obligations,
costs and expenses resulting from or arising out of (A) any representation
or warranty of Seller in Article II not being true and correct when made,
(B) any nonperformance or breach of any covenant or agreement of Seller
contained in this Agreement, (C) any violation of SHVA resulting from the
conduct of the Denver 6 Business prior to April 1, 1998, (D) the failure
to obtain the consent described in Item (1) on Schedule 2.7 of the Seller
Disclosure Schedule, if applicable, (E) Item (2) on Schedule 2.10 of the
Seller Disclosure Schedule or (F) to the extent arising out of the conduct
of the SMATV Business prior to April 1, 1998, Items (2) and (4) on Schedule
2.11 of the Seller Disclosure Schedule; and
(ii) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts, and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
(b) From and after the Closing (or, if applicable, the Second Closing),
Seller shall assume and be liable to Purchaser for the obligations of Netlink
USA under Section 10 of the Joint Venture Terms incorporated and included in the
SNG Agreement, on the same terms and subject to the same conditions as were
applicable to Netlink USA thereunder.
(c) Notwithstanding the foregoing provisions of this Section 8.1, no claim
shall be made by Purchaser (i) under this Section 8.1 with respect to Taxes for
which Seller's obligations are governed by Article IX, (ii) for lost profits,
lost revenues or other indirect or consequential damages or (iii) with respect
to actions taken or required to be taken after April 1, 1998 pursuant to the
SHVA Agreement. In addition, notwithstanding the foregoing provisions of this
Section 8.1, no claim shall be made by Purchaser for any losses, damages,
liabilities, deficiencies, obligations, costs and expenses (and amounts incident
or relating to or resulting from any or all of the foregoing) (collectively,
"Losses") referred to in Section 8.1(a) unless and until any or all of such
Losses exceed
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(A) in the case of any such Losses resulting from or arising out of the Netlink
Businesses or Telluride, $375,000 or (B) in the case of all other of such
Losses, $1,350,000 (as applicable, the "Minimum Amount"); provided, however,
that (x) at such time as the aggregate amount of such Losses exceeds the
applicable Minimum Amount, Purchaser may assert a claim for the full amount of
the applicable of such Losses and (y) the foregoing limitation shall not apply
to Losses arising out of any breach of the representations and warranties or
covenants of Seller set forth in Sections 2.24 and 5.5.
(d) Purchaser acknowledges and agrees that following the Closing, its sole
and exclusive remedy with respect to any and all claims relating to this
Agreement and the transactions contemplated hereby (other than claims of, or
causes of action arising from, fraud) shall be pursuant to the indemnification
provisions set forth in this Article VIII or, with respect to Tax matters, the
indemnification provisions set forth in Article IX. In furtherance of the
foregoing, Purchaser hereby waives, from and after the Closing Date, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action (other than claims of, or causes of action arising from, fraud)
it or any of its affiliates may have against Seller and its affiliates arising
under or based upon any Federal, state, local or foreign statute, law,
ordinance, rule or regulation or otherwise (except pursuant to the
indemnification provisions set forth in this Article VIII or Article IX).
8.2 Indemnification by Purchaser.
(a) Subject to written notice of such claim for indemnification being
given to Purchaser within the appropriate survival period set forth in Section
10.1, Purchaser covenants and agrees, on the terms and subject to the
limitations set forth in this Agreement, to indemnify, defend and hold harmless
Seller from and against:
(i) all losses, damages, liabilities, deficiencies, obligations,
costs and expenses resulting from or arising out of (A) any
misrepresentation or breach of warranty of Purchaser in Article III, (B)
any nonperformance or breach of any covenant or agreement of Purchaser
contained in this Agreement, (C) any guarantee or obligation to assure
performance given or made by Seller or an affiliate of Seller with respect
to any obligation of the Netlink Subsidiaries set forth in clause (D)
below; (D) all obligations and liabilities of whatever kind and nature,
primary or secondary, direct or indirect, absolute or contingent, known or
unknown, whether arising before, on or after the Closing Date, of the
Netlink Subsidiaries, in each case other than items which Seller has
expressly agreed to pay or perform after the Closing Date pursuant to this
Agreement and other than to the extent such obligation or liability arises
out of a breach of a representation or warranty of Seller contained in this
Agreement; and (E) any indemnification obligations of Seller under or
pursuant to or arising out of the Primestar Transaction or the Primestar
Agreement other than any of such obligations for which (and to the extent
that) Seller would be obligated to indemnify Purchaser pursuant to Section
8.1(a) of this Agreement or Section 10 of the Joint Venture Terms
incorporated into the SNG Agreement if Seller had transferred the SNG
Shares to Purchaser at the Closing.
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(ii) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts, and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
(b) Notwithstanding the foregoing provisions of this Section 8.2, no
claims shall be made by Seller (i) for any Losses referred to in clause (A) or
(B) of Section 8.2(a) unless and until any or all of such Losses exceed
$1,725,000 (or in the event that only the Initial Closing occurs, $375,000);
provided, however, that (x) at such time as the aggregate amount of such Losses
exceeds the applicable of the foregoing amounts, Seller may assert a claim for
the full amount of the applicable of such Losses and (y) the foregoing
limitation shall not apply to Losses arising out of any breach of the
representations and warranties or covenants of Purchaser set forth in Sections
3.8 and 5.5; (ii) for lost profits, lost revenues or other indirect or
consequential damages.
(c) Seller acknowledges and agrees that following the Closing, its sole
and exclusive remedy with respect to any and all claims relating to this
Agreement and the transactions contemplated hereby (other than claims of, or
causes of action arising from, fraud) shall be pursuant to the indemnification
provisions set forth in this Article VIII or, with respect to Tax matters, the
indemnification provisions set forth in Article IX. In furtherance of the
foregoing, Seller hereby waives, from and after the Closing Date, to the fullest
extent permitted under applicable law, any and all rights, claims and causes of
action (other than claims of, or causes of action arising from, fraud) it or any
of its affiliates may have against Purchaser and its affiliates arising under or
based upon any federal, state, local or foreign statute, law, ordinance, rule or
regulation or otherwise (except pursuant to the indemnification provisions set
forth in this Article VIII or Article IX).
8.3 Defense of Action.
(a) Any party seeking indemnification under Section 8.1 or 8.2 hereof will
give the party from whom such indemnification is sought prompt notice of any
third party claim, investigation, action, suit or proceeding with respect to
which such indemnification is sought. In the case of any such third party
claim, such party (the "Indemnified Party") shall be entitled, at the sole
expense and liability of the party from whom indemnification is sought (the
"Indemnifying Party"), to exercise full control of the defense, compromise or
settlement of any third party claim, investigation, action, suit or proceeding
unless the Indemnifying Party within a reasonable time after the giving of such
notice by the Indemnified Party shall: (a) deliver a written confirmation to
such Indemnified Party that the indemnification provisions of Section 8.1 or 8.2
(as the case may be) are applicable to such claim, investigation, action, suit
or proceeding and that the Indemnifying Party will indemnify such Indemnified
Party in respect of such claim, action or proceeding pursuant to the terms of
Section 8.1 or 8.2 (as the case may be), (b) notify such Indemnified Party in
writing of the Indemnifying Party's intention to assume the defense thereof, and
(c) retain legal counsel reasonably satisfactory to such Indemnified Party to
conduct the defense of such claim, investigation, action, suit or proceeding.
(b) If the Indemnifying Party so assumes the defense of any such claim,
investigation, action, suit or proceeding in accordance herewith, then such
Indemnified Party shall cooperate with the Indemnifying Party in any manner that
the Indemnifying Party reasonably may request in
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connection with the defense, compromise or settlement thereof. If the
Indemnifying Party so assumes the defense of any such claim, investigation,
action, suit or proceeding, the Indemnified Party shall have the right to employ
separate counsel and to participate in (but not control) the defense,
compromise, or settlement thereof, but the fees and expenses of such counsel
shall be the expense of such Indemnified Party unless (i) the Indemnifying Party
has agreed to pay such fees and expenses, (ii) any relief other than the payment
of money damages is sought against the Indemnified Party or (iii) such
Indemnified Party shall have been advised by its counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the Indemnifying Party, and in any such case the reasonable
fees and expenses of such separate counsel shall be borne by the Indemnifying
Party. The Indemnifying Party shall not, without the written consent of such
Indemnified Party, settle or compromise or consent to entry of any judgment with
respect to any such claim, investigation, action, suit or proceeding (x) in
which any relief other than the payment of money damages is or may be sought
against such Indemnified Party, (y) in which the amount of money damages
contemplated to be paid in connection with such settlement, compromise or
judgment, exceeds any dollar limitations on the Indemnifying Party's obligations
hereunder pursuant to Section 8.1 or 8.2 or (z) which does not include as an
unconditional term thereof the giving by the claimant, party conducting such
investigation, plaintiff or petitioner to such Indemnified Party of a release
from all liability with respect to such claim, action, suit or proceeding.
(c) In the event that the indemnification provisions contained in this
Article VIII and the indemnification provisions contained in Section 9.7 are
both applicable or otherwise conflict with respect to any particular matter,
then the indemnification provisions contained in Section 9.7 shall be
controlling and shall apply for all purposes as to such matters.
8.4 Insurance Proceeds. The amount which each of Seller and Purchaser
may be required to pay to the other party pursuant to this Article VIII shall be
reduced (retroactively, if necessary) by any insurance proceeds or refunds
actually recovered by or on behalf of the applicable Indemnified Party in
reduction of the related Losses. If an Indemnified Party shall have received
the payment required by this Agreement from the Indemnifying Party in respect of
Losses and shall subsequently receive insurance proceeds or refunds in respect
of such Losses, then the Indemnified Party shall promptly repay to the
Indemnifying Party a sum equal to the amount of such insurance proceeds or
refunds actually received, net of costs and expenses, but not exceeding the
amount paid by the Indemnifying Party in respect of such Losses.
ARTICLE IX
TAX MATTERS
The parties agree that for purposes of this Article IX, in the event the
Primestar Transaction is consummated, Seller shall have no obligations with
respect to any tax liability incurred by the SNG Subsidiaries after the date on
which the Primestar Transaction is consummated (the "Primestar Closing Date")
and in such case, all references to the Closing Date or the Closing in this
Article IX and in Section 4.1(b)(vii) shall, with respect to all of the SNG
Subsidiaries, be deemed to refer to the Primestar Closing Date.
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9.1 Tax Returns. Seller has made available (or, in the case of Tax
Returns filed after the Closing Date, will make available) to Purchaser (i)
complete and accurate copies of the portions applicable to the Netlink
Corporations of all Federal or state consolidated or combined income Tax
Returns, and amendments thereto and (ii) all other Tax Returns, and any
amendments thereto, filed by or on behalf of the Netlink Corporations (or with
respect to its assets or businesses) for all taxable years or applicable periods
ending on or prior to the Closing Date, in each case, to the extent such Tax
Returns are relevant in the preparation by or on behalf of the Netlink
Corporations of Tax Returns subsequent to the Closing Date.
9.2 Termination of Prior Tax Settlement Agreements. All tax
settlement and tax-sharing agreements, arrangements, policies and guidelines,
formal or informal, express or implied, that may exist between the Netlink
Corporations and any affiliate ("Settlement Agreements") and all obligations
thereunder shall terminate prior to April 1, 1998. After April 1, 1998, none of
the Netlink Corporations shall be bound by such Settlement Agreements or have
any liability thereunder.
9.3 Pre-Closing Taxes.
(a) Each of the Netlink Corporations shall continue to be included
for all taxable periods (or portions thereof) ending on or before the Closing
Date in the consolidated Federal income Tax Return and any required state or
local consolidated or combined income or franchise Tax Returns of any affiliated
group of which any of them is or was a member (each of which is herein referred
to as a "Selling Affiliated Group") which Tax Returns include any of the Netlink
Corporations (all such Tax Returns including taxable periods (or portions
thereof) of the Netlink Corporations ending on or before the Closing Date are
hereinafter referred to, collectively, as "Pre-Closing Consolidated Returns").
Seller shall cause each Selling Affiliated Group to timely prepare and file (or
cause to be prepared and filed) all Pre-Closing Consolidated Returns and shall
timely pay all Taxes shown as due and payable on Pre-Closing Consolidated
Returns (including any Taxes with respect to any deferred income triggered into
income by Treasury Regulation (S) 1.1502-13 and Treasury Regulation (S) 1.1502-
14 and any excess loss accounts taken into income under Treasury Regulations (S)
1.1502-19).
(b) Seller shall timely prepare (or cause to be so prepared) all
other Tax Returns of the Netlink Corporations required by law for all taxable
periods ending on or before the Closing Date ("Pre-Closing Non-Consolidated
Returns"). All Pre-Closing Non-Consolidated Returns shall be prepared in a
manner consistent with prior practice and shall properly include and reflect the
income, activities, operations and transactions of the Netlink Corporations, as
applicable. Seller shall timely file (or cause to be so filed) all Pre-Closing
Non-Consolidated Returns which are due on or before the Closing Date and shall
pay (or cause the Netlink Corporations to pay as each may be liable) all Taxes
due thereon. Seller shall also pay (or cause the Netlink Corporations to pay as
each may be liable) the full amount of any Tax which is payable by the Netlink
Corporations without the filing of a Tax Return ("Non-Return Taxes"), payment of
which is due on or before the Closing Date. With respect to each Pre-Closing
Non-Consolidated Return due after the Closing Date, Seller shall deliver (or
cause to be so delivered) each such Pre-Closing Non-Consolidated Return to
Purchaser at least 15 days prior to the due date of such Tax Return, together
with a payment in an amount equal to the amount of Tax shown as due and payable
on such Pre-Closing Non-
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Consolidated Return (after giving effect to any credits for the amount of Tax,
if any, paid on or prior to the Closing Date as shown on such Tax Return).
Subject to the foregoing, Purchaser shall cause the Netlink Corporations to file
all such Pre-Closing Non-Consolidated Returns that are due after the Closing
Date and to pay the amount of Tax shown as due and payable thereon to the extent
each is liable for such payment (after giving effect to any credits for the
amount of Tax, if any, previously paid as shown on such Tax Return).
9.4 Transfer Taxes. Each of Purchaser and Seller agrees to share
equally in the costs of, all sales, use, transfer, stamp, value added, duty,
excise, stock transfer, real property transfer, recording, gains and other
similar taxes and fees arising out of or in connection with the transactions
contemplated by this Agreement.
9.5 Post-Closing Taxes.
(a) Purchaser shall timely prepare and file (or cause to be so
prepared and filed) all Tax Returns required by law for all Taxes, covering
solely the Netlink Corporations, for taxable periods ending after the Closing
Date ("Post-Closing Returns"). Purchaser shall timely pay or cause to be paid
all Taxes relating to Post-Closing Returns ("Post-Closing Taxes"). Seller shall
reimburse Purchaser for (i) the amount of Post-Closing Taxes reported as payable
on each Post-Closing Return that is attributable to the portion of the period
covered by such Tax Return ending on the close of business on the Closing Date
(the "Pre-Closing Tax Period"), determined by treating the close of business on
the Closing Date as the last date of the taxable period, and (ii) the amount of
any Non-Return Tax payable after the Closing Date that is attributable to the
portion of the period covered by such payment which ends on or before the close
of business on the Closing Date (pro rata based upon the number of days covered
by such payment), in each case after giving effect to any credits for the amount
of such Post-Closing Tax or such Non-Return Tax, if any, paid on or prior to the
Closing Date by Seller, the Netlink Corporations or any of their predecessors or
affiliates. Such reimbursements shall be made on or before the later of the
date on which such return is filed or 15 days after receipt of a copy of such
return or evidence of such payment and Purchaser shall provide Seller with
copies of workpapers which will permit Seller to review and substantiate the
accuracy of such return or such payment.
(b) To the extent any determination of Taxes with respect to the
Netlink Subsidiaries, whether as the result of an audit or examination, a claim
for refund, the filing of an amended return, the application of an overpayment
as an offset, or otherwise, results in a refund of Taxes paid (a "Refund"),
Seller shall be entitled to any part of such Refund attributable to any period
ending on or before April 1, 1998, and the applicable Netlink Subsidiary shall
be entitled to the balance of such Refund. The party receiving a Refund shall,
within 10 days after receipt, pay over to the other party the portion of the
Refund to which the other party is entitled under this paragraph (along with a
proportionate share of any interest amounts received with the Refund).
9.6 Tax Cooperation. After the Closing Date, Seller shall submit (or
cause to be submitted) to Purchaser blank Tax Return workpaper packages.
Purchaser shall cause the Netlink Corporations to prepare completely and
accurately all information that Seller shall reasonably request in such
workpaper packages and shall submit to Seller such packages within the later
of 90
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calendar days after Purchaser's receipt thereof or 90 calendar days after the
close of the taxable period to which a workpaper package relates. The parties
shall cooperate with each other in connection with any Tax investigation, audit
or other proceeding. Purchaser shall preserve all information, returns, books,
records and documents relating to any liabilities for Taxes with respect to a
taxable period until the later of the expiration of all applicable statutes of
limitation and extensions thereof, or a final determination with respect to
Taxes for such period.
9.7 Indemnification.
(a) After the Closing Date, Seller shall indemnify and hold harmless
Purchaser and its subsidiaries, successors and assigns from and against all
Taxes of the Netlink Corporations (the "Companies") allocable to any period
ending on or prior to April 1, 1998 (referred to as a "Pre-Signing Period")
whether such Taxes are due before or after Closing. The Taxes allocable to a
Pre-Signing Period shall be determined on the basis of a closing of the books of
the Companies at the end of the day on April 1, 1998. The Taxes attributable to
the Companies' direct and indirect interest in the Tax Partnerships shall be
determined by a closing of the books of each Tax Partnership as of the end of
the day on April 1, 1998, and all Taxes attributable to the operations and
activities of a Tax Partnership through the end of the day on April 1, 1998
shall be considered Taxes of the Companies allocable to a Pre-Signing Period.
In this Agreement, any reference to "Tax Partnerships" means Netlink USA, SNG,
UVI Network WGN, Superstar Entertainment Netlink WGN and any other entity
treated as a partnership for federal income tax purposes in which the Companies
have a direct or indirect interest. Non-Return Taxes shall be apportioned based
upon the number of days covered by such payment which are on or before April 1,
1998 and the total number of days covered by such payment, in each case, to the
extent such amount exceeds any amount previously paid to Purchaser with respect
to such Tax pursuant to Section 9.3 or 9.5, as applicable. Seller shall pay such
amounts as it is obligated to pay to Purchaser within 10 calendar days after
payment of any applicable Tax liability by Purchaser or any subsidiary of
Purchaser and to the extent not paid by Seller within such 10-day period, the
amount due shall thereafter include interest thereon at a rate per annum equal
to the "overpayment rate" under Section 6621(a) of the Code (the "Overpayment
Rate"), adjusted as and when changes to such Overpayment Rate shall occur,
compounded semi-annually. Seller shall indemnify and hold harmless Purchaser or
any subsidiary of Purchaser, successors and assigns, from and against (i) any
Tax liability for periods prior to and including the Closing Date resulting
solely from the Netlink Subsidiaries being severally liable for any Taxes of any
consolidated group of which the Netlink Corporations is or was a member pursuant
to Treasury Regulations (S) 1.1502-6 or any analogous state or local tax
provision (including, without limitation, any Tax liability with respect to any
Pre-Closing Consolidated Return), and (ii) any Tax liability resulting from the
Netlink Corporations ceasing to be a member of any Selling Affiliated Group
filing consolidated or combined Tax Returns (including, without limitation, Tax
liability for excess loss accounts and deferred intercompany gains).
(b) After the Closing Date, Purchaser and each of its subsidiaries,
jointly and severally shall indemnify and hold harmless Seller and its
affiliates, successors and assigns from and against (i) any Tax liability
resulting from any addition to the taxable income of the Netlink Corporations
that is attributable to the period ending after April 1, 1998 and on or before
the Closing Date, using for this purpose the taxable income as reflected on the
Federal consolidated income tax return filed
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by TCI, other than Tax liability described in clause (ii) of Section 9.7(a)
("Addition to Taxable Income"), provided, that such Tax liability shall be
reduced by the amount of any payment made to Seller with respect to the
Estimated Tax Payment pursuant to Section 4.1(b)(vii), (ii) any Tax liability
with respect to any Non-Return Taxes, that are attributable to the portion of
the period covered by any payment of such Taxes which begins after April 1, 1998
and ends on or before the Closing Date (determined on a pro rata basis based
upon the number of days covered by such payment which are both after April 1,
1998 and on or before the Closing Date and the total number of days covered by
such payment) and (iii) any Tax liability with respect to the period beginning
after the Closing Date on a Post-Closing Return and with respect to any Non-
Return Taxes attributable to the portion of the period covered by any payment of
such Taxes which begins after the Closing Date (determined on a pro rata basis
based upon the number of days covered by such payment which are after the
Closing Date and the total number of days covered by such payment). For purposes
of clause (i) of the previous sentence, the amount of the Tax liability shall be
deemed to equal: (x) 20% of such Addition to Taxable Income to the extent that
the income resulting in the Addition to Taxable Income reduces the amount of the
excess loss accounts that Seller would otherwise be responsible for under
Section 9.3(a) or clause (ii) of Section 9.7(a); and (y) 40% of any remaining
Addition to Taxable Income not described in clause (x). Purchaser shall pay or
cause the appropriate Netlink Subsidiary to pay such amounts within 10 calendar
days after payment of any such Tax liability by Seller and, to the extent not
paid within such 10-day period, the amount due shall thereafter include interest
thereon at the Overpayment Rate, compounded semi-annually.
9.8 Notification of Proceedings, Control; Refunds.
(a) In the event that Purchaser or any of the Netlink Subsidiaries receive
notice, whether orally or in writing, of any pending or threatened United States
Federal, state, local, municipal or foreign tax examinations, claims
settlements, proposed adjustments, assessments or reassessments or related
matters with respect to Taxes that could affect TCI, Seller or their
subsidiaries, or if TCI, Seller or any of their subsidiaries receive notice of
any matter that could affect Purchaser or any of the Netlink Subsidiaries, the
party receiving notice shall notify in writing the potentially affected party
within 10 calendar days thereof. The failure of any party to give the notice
required by this Section 9.8(a) shall not impair that party's rights under this
Agreement except to the extent that the other party demonstrates that it has
been damaged thereby.
(b) Subject to Section 9.9, each of Seller and Purchaser shall have the
right to control any audit or examination by any taxing authority, initiate any
claim for refund, file any amended return, contest, resolve and defend against
any assessment, notice of deficiency or other adjustment or proposed adjustment
relating or with respect to any Taxes, the ultimate liability for which is the
responsibility of that party or its affiliates under Section 9.7(a) or 9.7(b),
and each of Seller and Purchaser shall be entitled to, and to the extent
received by the other shall be promptly paid by the other, all refunds with
respect to any such Taxes.
9.9 Tax Effect of Payments. The amount of any payments required to be made
under this Article IX shall be reduced by the amount of any tax benefit actually
received by (including by refund or by reduction of or offset against Taxes
otherwise payable) the recipient by reason of the
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payment or incurrence by such recipient of the item for which the indemnity is
being sought. Each party shall notify the other of such receipt of any such tax
benefits.
9.10 Withholding. For purposes of withholding under Section 1445 of the
Code, Seller represents that Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Code. Seller shall provide to Purchaser prior to the
Closing Date a certificate, substantially in the form of Exhibit 9.10 hereto, or
an affidavit necessary to substantiate exemption from such withholding.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival. The representations and warranties of Purchaser and
Seller contained herein and the covenants of the parties contained in Sections
5.2, 5.3, 5.4, and 5.5 shall survive the Closing and continue in full force and
effect for one year after the Closing Date; provided that the representations
and warranties of Purchaser contained in Sections 3.3 and 3.13 and of Seller
contained in Sections 2.3 and 2.13 shall survive the Closing until the
expiration of the statute of limitations applicable to claims that may be
asserted in respect of the matters covered thereby. The obligations of the
parties in Section 5.6, Articles VIII, IX and X, shall survive the Closing
without limitation (subject to any applicable statute of limitations), except
pursuant to their terms. No covenant in any section not specified in the
previous sentence shall survive the Closing.
10.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail, return receipt
requested, or sent via facsimile, with confirmation of receipt, to the parties
at the following address or at such other address for a party as shall be
specified by notice hereunder:
(a) if to Purchaser, to:
United Video Satellite Group, Inc.
7140 South Lewis Avenue
Tulsa, Oklahoma 74136-5422
Attention: Peter C. Boylan
Telephone: (918) 488-4000
Facsimile No.: (918) 488-4928
with a copy to:
Holme Roberts & Owen LLP
1700 Lincoln, Suite 4100
Denver, Colorado 80203
Attention: Francis R. Wheeler, Esq.
Telephone: (303) 861-7000
45
<PAGE>
Facsimile No.: (303) 866-0200
(b) if to Seller, to:
Liberty Media Corporation
8101 East Prentice Avenue
Suite 500
Englewood, Colorado 80111
Attention: Robert R. Bennett
Telephone: (303) 721-5400
Facsimile No.: (303) 841-7344
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue, Suite 2900
New York, New York 10022-6030
Attention: Elizabeth Markowski, Esq.
Telephone: (212) 705-5000
Facsimile No.: (212) 705-5125
10.3 Interpretation. When a reference is made in this Agreement to
Exhibits, Articles or Sections, such reference shall be to an Exhibit, Article
or Section to this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party hereto to whom such information is to be made available.
The table of contents and Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. In this Agreement, except as
otherwise specifically provided, any reference to any event, change, condition
or effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity or
group of entities. In this Agreement, any reference to a "Material Adverse
Change" or "Material Adverse Effect" with respect to any entity or group of
entities means any event, change or effect that is materially adverse to the
condition (financial or otherwise), properties, assets, liabilities, business,
operations or results of operations of such entity and its subsidiaries, taken
as a whole. In this Agreement, any reference to a party's "knowledge" means
such party's actual knowledge after due and diligent inquiry of officers,
directors and other employees of such party reasonably believed to have
knowledge of such matters. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.
10.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more
46
<PAGE>
counterparts have been signed by each of the parties hereto and delivered to the
other parties hereto, it being understood that all parties hereto need not sign
the same counterpart.
10.5 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Seller Disclosure Schedule, the Nondisclosure Agreement and the SNG Agreement
(a) constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties hereto with respect to the subject
matter hereof; (b) are not intended to confer upon any other person any rights
or remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided.
10.6 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties hereto
further agree to replace such void or unenforceable provision of this Agreement
with a valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of such void or
unenforceable provision.
10.7 No Waiver. No failure or delay on the part of any party hereto
in the exercise of any right hereunder shall impair such right or be construed
to be a waiver of, or acquiescence in, any breach of any representation,
warranty or agreement herein, nor shall any single or partial exercise of any
such right preclude other or further exercise thereof or of any other right.
10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado (without regard
to the principles of conflicts of law thereof).
10.9 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
10.10 Expenses. Whether or not the transactions contemplated hereby
are consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisers, accountants and legal
counsel) shall be paid by the party incurring such expense.
10.11 Attorneys Fees. In the event of any proceeding to enforce this
Agreement, the prevailing party shall be entitled to receive from the losing
party all reasonable costs and expenses, including the reasonable fees of
attorneys, accountants and other experts, incurred by the prevailing party in
investigating and prosecuting (or defending) such action at trial or upon any
appeal.
47
<PAGE>
10.12 Further Assurances. In case at any time after the Closing or
applicable Closing, as the case may be, any further action is necessary or
desirable to carry out the purposes of this Agreement with respect to the
transactions consummated at such Closing and vest Purchaser and Seller with full
title to the Purchased Shares and UVSG Shares, respectively, delivered at such
Closing, each party shall, at the request and expense of the other party, and
without further consideration, execute and deliver such other instruments of
conveyance and transfer, fully cooperate with the requesting party and take such
other actions as the requesting party reasonably may request.
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
UNITED VIDEO SATELLITE GROUP, INC., a Delaware
corporation
By: /s/ Peter C. Boylan
_______________________________
Name: Peter C. Boylan
Title: President
LIBERTY MEDIA CORPORATION, a Delaware corporation
By: /s/ Robert R. Bennett
________________________________
Name: Robert R. Bennett
Title: President
48
<PAGE>
EXHIBIT 9.10
FORM OF
CERTIFICATE OF NON-FOREIGN STATUS
Section 1445 of the Internal Revenue Code of 1986, as amended (the
"Code") provides that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person. To inform the transferee
that withholding of tax is not required upon the disposition of a U.S. real
property interest by Liberty Media Corporation ("Seller"), the undersigned
hereby certifies the following on behalf of Seller;
ARTICLE XI Seller is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the Code and
Income Tax Regulations);
ARTICLE XII Seller's U.S. employer identification number is 84-1288730,
and
ARTICLE XIII Seller's office address is 8101 E. Prentice Ave., Suite 500,
Englewood, CO 80111.
Seller understands that this certification may be disclosed to the
Internal Revenue Service by transferee and that any false statement contained
herein could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have authority to sign this document on
behalf of Seller.
Executed on _____, 1998.
By:____________________
Name:_______________
Title:______________
49
<PAGE>
EXHIBIT 10.2
News America Incorporated
1211 Avenue of the Americas
New York, New York 10036
June 10, 1998
United Video Satellite Group, Inc.
7140 S. Lewis Avenue
Tulsa, Oklahoma 74136-5422
Attention: Peter C. Boylan III
President and Chief Operating Officer
Gentlemen:
This letter agreement (the "Agreement", which term includes the Annexes and
Schedules hereto) confirms the terms and conditions upon which News America
Incorporated ("NAI"), a subsidiary of The News Corporation Limited ("News
Corp."), will (A) sell to United Video Satellite Group, Inc. ("UVSG" or "United
Video"), a subsidiary of Tele-Communications Inc. ("TCI"), (i) all of the
outstanding stock of News America Publications Inc. ("Publications") (which owns
and publishes TV Guide and to which, prior to the closing hereunder (the
"Closing"), NAI will cause the transfer, as a contribution to capital, of the
assets of NAI's entertainment web site known as TVGEN (which includes an
electronic program guide) together with rights to such intellectual property
owned by NAI or any of its controlled affiliates as is used in the conduct of
the TVGEN business (such assets and rights, "TVGEN")) and (ii) all of the
outstanding stock of TVSM, Inc. ("TVSM" and, together with Publications, the
"NAI Contributed Entities") (which owns and publishes print cable television
programming guides and which NAI expects to acquire shortly) and (B) assign to
UVSG any unexpired rights NAI or any of its affiliates may have (e.g.,
indemnification, post-closing tax covenants, access rights, further assurances,
etc.) under agreements pursuant to which it acquired or (in the case of TVSM)
expects to acquire any NAI Contributed Entity or any material portion of any NAI
Contributed Entity's business or assets (collectively, the "Transaction"), all
upon the terms and subject to the conditions set forth herein and in the Annexes
hereto and such additional terms and conditions as may be agreed upon by the
parties hereto. Provided that the effect thereof would not be adverse to TCI or
UVSG in any material respect (determined without regard to any other materiality
provision hereof), NAI may transfer the NAI Contributed Entities to a direct or
indirect subsidiary of News Corp. incorporated in the United States prior to the
Closing. In the event of such transfer, such entity shall make the same
representations, warranties and covenants to TCI and UVSG as made by NAI in this
Agreement (modified as appropriate to reference such entity) and notwithstanding
such transfer, NAI shall remain bound hereby for all purposes, including
indemnification. Unless the context indicates otherwise, the terms
"Publications", "TVSM", "NAI Contributed Entities" and "NAI Contributed Entity"
as used herein include the subsidiaries and, where applicable, controlled
affiliates of Publications, TVSM, and the applicable NAI Contributed Entity,
respectively, and the terms "TCI", "News Corp.", "NAI" and "UVSG" include their
<PAGE>
United Video Satellite Group Inc.
June 10, 1998
respective subsidiaries and, where applicable, controlled affiliates. Further,
the term "Publications" as used herein, unless the context otherwise requires,
includes TVGEN as if the contribution of TVGEN to its capital had been
consummated prior to the date hereof. As used herein, a "controlled affiliate"
of a person is any other person that the first person directly or indirectly
controls and the term "control" means the ability to direct or cause the
direction (whether through the ownership of voting securities, by contract or
otherwise) of the management and policies of such person or to control (whether
affirmatively or negatively and whether through the ownership of voting
securities, by contract or otherwise) the decision of such person to engage in
the particular conduct at issue.
1. Definitive Agreements. As soon as practicable after the date hereof,
our respective legal counsel will prepare and negotiate definitive agreements
with respect to the Transaction containing the principal terms and conditions
set forth herein as well as such additional terms and conditions as may be
customary or appropriate under the circumstances (the "Definitive Agreements").
The parties hereto will cooperate with each other to the fullest extent
reasonably practicable in the preparation of the Definitive Agreements and all
related documents, in the obtaining of all necessary consents and in complying
with all regulatory requirements. Although the parties intend to diligently
negotiate and promptly enter into the Definitive Agreements, the parties
acknowledge and agree that this Agreement is a binding agreement, subject in any
event to the terms and conditions hereof.
2. Investigation; Confidentiality. The parties hereto will permit each
other and their financial advisors and accounting and legal representatives to
conduct an investigation and evaluation of the businesses included in the
Transaction, will provide such assistance as is reasonably requested and will
give access at reasonable times to information related to the assets and
operations of the businesses included in the Transaction. As promptly as
practicable after the execution of this Agreement, NAI shall deliver to UVSG
audited consolidated financial statements of each of Publications and TVSM as of
the end of the most recently completed fiscal year of each such entity and the
end of the preceding fiscal year and for each of the years in the three-year
period ended as of the end of the most recently completed fiscal year of each
such entity in the form required to be included by UVSG in the proxy statement
for its stockholders meeting to approve the Transaction in accordance with
federal securities laws and regulations (the "Audited NAI Contributed Entity
Financial Statements").
Except to the extent that information provided is in the public domain or
is or becomes readily ascertainable from public sources, such information shall
be kept in strict confidence. If this Agreement is terminated for any reason,
such information and all such documentation with respect thereto and all copies
thereof shall be destroyed or returned and all notes, memoranda or other similar
documents shall be destroyed or returned.
3. Conduct of Business. During the period from the date hereof to the
Closing or the earlier termination of this Agreement, except as set forth on
Schedule 1 hereto, NAI shall cause the NAI Contributed Entities (including TVSM
and its subsidiaries only following the date of the acquisition thereof by NAI)
to, and UVSG will (a) carry on their respective businesses in accordance
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United Video Satellite Group Inc.
June 10, 1998
with past custom and practice, (b) not enter into any contract, agreement or
transaction other than in the ordinary course of business and in accordance with
past custom and practice and (c) not remove any of their assets by way of
dividend, distribution, withdrawal or any other means without prior written
consent of the other party. Nothing contained in the foregoing shall preclude
UVSG or the NAI Contributed Entities from disposing of immaterial assets in the
ordinary course of business consistent with past practice in transactions with
nonaffiliates.
4. Closing Conditions. The obligations of the parties to consummate the
Transaction will be subject to the fulfillment at or prior to the Closing of the
conditions set forth in this Agreement, including Annex A hereto (the "Term
Sheet") and such other customary conditions as the parties may agree.
5. Tax Treatment. The parties intend that the Transaction and the
transaction between UVSG and Liberty Media Corporation ("Liberty"), a subsidiary
of TCI, described in paragraph A6 of Schedule 1 (the "Netlink Transaction") will
be treated in the manner set forth in Section 8 of the Covenants set forth in
Item D of Annex A.
6. Public Disclosure. Except as required by law or regulation or the
requirements of the NASD or the New York Stock Exchange, no public disclosure or
publicity concerning the subject matter hereof or the Transaction will be made
without the approval of each of the parties hereto. The parties hereto will
cooperate to prepare a joint press release to be issued promptly following the
execution and delivery of this Agreement.
7. Expenses. Each party hereto shall pay its own expenses (including
fees and expenses of legal counsel, investment bankers, brokers or other
representatives or consultants) in connection with the Transaction (whether or
not consummated).
8. Termination. If the Transaction has not been consummated by March 31,
1999, either party may terminate this Agreement, provided that the failure of
the Transaction to be consummated is not due to any breach of this Agreement by
the terminating party.
9. Representations and Warranties. Each party hereto hereby represents
and warrants to the other that, subject to obtaining the consents and approvals
and complying with the governmental and regulatory requirements referred to in
the Annexes and Disclosure Schedules to this Agreement, (i) it is duly
organized, validly existing and in good standing under the jurisdiction in which
it was formed, (ii) it has the full right, power and authority to execute this
Agreement and to consummate the Transaction, (iii) the execution, delivery and
performance hereof will not conflict with nor result in any breach of provisions
of, or constitute a default under, any charter or bylaw or any material
agreement or other instrument to which it is a party or by which it is bound,
and (iv) this Agreement is a valid and binding obligation of such party,
enforceable in accordance with its terms, subject only to (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors' rights generally, and (b) the availability of injunctive
relief and other equitable remedies. NAI further represents and warrants to
UVSG that it has no plan or
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United Video Satellite Group Inc.
June 10, 1998
intention to sell, exchange or otherwise dispose of any of the UVSG Shares
received in the Transaction. TCI represents and warrants to NAI that it has no
plan or intention to sell, exchange or otherwise dispose of any of its shares of
UVSG. Each party hereto also hereby makes the representations and warranties to
the other set forth in Annex B (in the case of NAI) and Annex C (in the case of
UVSG) and agrees to comply with the covenants set forth in Annex A hereto and
Annex D hereto (Tax Covenants) unless and until this Agreement is terminated in
accordance with its terms. UVSG acknowledges that NAI does not at the date
hereof own any interest in TVSM.
10. Investments. Until the Closing (when the Stockholders Agreement
described in Annex A will become effective) or the earlier termination of this
Agreement, UVSG (in the case of TCI) and the NAI Contributed Entities (in the
case of News Corp.) will be the exclusive vehicles through which TCI and News
Corp. directly or indirectly through their subsidiaries or controlled affiliates
conduct guide businesses (print, electronic or otherwise), whether within or
outside the United States, other than the provision by News Digital Systems plc
and its subsidiaries of technology relating to electronic program guides solely
in conjunction with the development and sale of encryption and conditional
access services for television and data broadcasting (the "NDS Business").
Except (a) as contemplated by Schedule 1, (b) for the acquisition of TVSM by NAI
(c) for additional investments by UVSG in the existing businesses of entities
currently controlled by UVSG, and by NAI in the NAI Contributed Entities and (d)
for the NDS Business, neither of TCI or News Corp. shall, directly or indirectly
through subsidiaries or controlled affiliates, invest in or acquire any guide
business prior to the Closing of the Transaction or the earlier termination of
this Agreement.
11. Further Assurances. Each party hereto shall negotiate, execute and
deliver all reasonably required documents and do all other acts which may be
reasonably requested by the other party hereto to implement and carry out the
terms and conditions of the Transaction. Each party shall use its commercially
reasonably efforts not to take any action or fail to take any action which would
reasonably be expected to frustrate the intent and purposes of this Agreement.
12. Notices. All notices and other communications hereunder shall be in
writing and shall be delivered personally, telecopied (if receipt of which is
confirmed by the person to whom sent) or mailed by registered or certified mail
(if return receipt is requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice) (notice
shall be deemed given upon receipt, if delivered personally or by telecopy, or
on the third business day following mailing, if mailed):
(a) If to UVSG, to:
United Video Satellite Group, Inc.
7140 S. Lewis Avenue
Tulsa, Oklahoma 74136-5422
Attention: President
(with a copy similarly addressed to the Legal Department)
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United Video Satellite Group Inc.
June 10, 1998
Telephone: (918) 488-4993
Telecopier: (918) 488-4928
with copies to:
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Elizabeth M. Markowski
Telephone: (212) 705-5000
Telecopier: (212) 705-5125
and to:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Stephen Brett
General Counsel
Telephone: (303) 267-4800
Telecopier: (303) 488-3245
(b) If to NAI, to:
News America Incorporated
1211 Avenue of the Americas
New York, New York 10036
Attention: Arthur M. Siskind
Senior Executive Vice President
and Group General Counsel of
The News Corporation Limited
Telephone: (212) 852-7007
Telecopier: (212) 768-2029
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Jeffrey W. Rubin
Telephone: (212) 476-8224
Telecopier: (212) 697-6686
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United Video Satellite Group Inc.
June 10, 1998
13. Governing Law. This Agreement shall be governed by the laws of the
State of New York applied to contracts made and wholly performed in such State.
If the foregoing accurately reflects our agreement, please sign the
enclosed duplicate of this Agreement in the space provided below and return the
same to the undersigned.
Very truly yours,
NEWS AMERICA INCORPORATED
/s/ Arthur M. Siskind
By:_________________________________
Name: Arthur M. Siskind
Title: Senior Executive
Vice President
and General Counsel
Accepted and Agreed:
UNITED VIDEO SATELLITE GROUP INC.
/s/ Peter C. Boylan
By:_________________________________
Name: Peter C. Boylan
Title: President and COO
Accepted and Agreed (solely relating to the
investments covenant contained in Section 10 hereof;
the covenants set forth in Annex A hereto to the
extent applicable to TCI or News Corp., respectively;
the entry into the Stockholders' Agreement and the nego-
tiation of the Ancillary Agreements referred to in Annex A
hereto):
TELE-COMMUNICATIONS, INC.
/S/ Gary S. Howard
By:_________________________________
Name: Gary S. Howard
Title: Executive Vice President
THE NEWS CORPORATION LIMITED
/s/ Arthur M. Siskind
By:_________________________________
Name: Arthur M. Siskind
Title: Senior Executive Vice President
and Group General Counsel
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<PAGE>
ANNEX A - TERM SHEET
--------------------
A. Transaction Combine the businesses of TV Guide,
TVSM, TVGEN and UVSG, with UVSG as
the surviving public company. The
parties intend that the Transaction
and the Netlink Transaction be
treated in the manner set forth in
Section 8 of the Covenants set forth
in Item D below.
B. Structure UVSG acquires 100% of the shares of
Publications, the assets of TVGEN
(which will have been transferred to
Publications prior to the Closing)
and 100% of the shares of TVSM from
NAI for $800,000,000 in cash (payable
by wire transfer of same day funds)
and 30,000,000 shares of UVSG common
stock (the "UVSG Shares"), upon the
terms and subject to the conditions
set forth in this Agreement and such
additional terms and conditions as
may be agreed upon by the parties
hereto. In the event of any
reduction in the aggregate price
payable by NAI to acquire TVSM, there
shall be a corresponding reduction in
the cash portion of the purchase
price payable by UVSG in the
Transaction. When the shares of the
NAI Contributed Entities are
delivered to UVSG, the NAI
Contributed Entities shall have no
indebtedness for borrowed money, no
outstanding debt securities or
obligation to issue debt securities
and no liability or obligation (as
guarantor or otherwise) with respect
to the indebtedness of others (other
than any other NAI Contributed Entity
and other than the Limited Recourse
Guaranty from Publications to
Provident Bank referred to on
Schedule 15 of the NAI Disclosure
Schedule) and shall have aggregate
positive working capital (before
deduction of net deferred
subscription income but after giving
effect to the cash distributions
referred to below) of not less than
$45,000,000 (or $48,000,000 in the
event NAI has acquired TVSM prior to
the Closing hereunder). On or prior
to the Closing, any intercompany
amount owed by Publications or any
other NAI Contributed Entity (other
than to another NAI Contributed
Entity) (net of amounts due to any
NAI Contributed Entity by NAI or any
affiliate of NAI which is not an NAI
Contributed Entity) shall be
contributed to the capital of the
applicable NAI Contributed Entity
and/or canceled. Subject to
compliance with the
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foregoing, Publications may from time to
time prior to or at the Closing
distribute (by dividend or otherwise)
all cash (other than cash necessary to
cover outstanding checks at the date on
which the Closing occurs (such date, the
"Closing Date")) of the NAI Contributed
Entities. Following its acquisition of
TVSM and prior to the Closing, NAI will
contribute to TVSM any funds deposited
in escrow pursuant to the TVSM Merger
Agreement (as hereinafter defined) that
are released to NAI or any of its
affiliates prior to the Closing and
immediately prior to the Closing will
assign to TVSM all of its and its
affiliates' rights to any balance of
such escrowed funds.
C. Resulting Capital Structure 1. Existing UVSG 11,732,946
Public Shareholders Class A Common
(including issued and (15.6% of
pending options) total equity)
2. TCI 14,518,760
Class A Common
/2/18,748,294
Class B Common
(44.4% of total
equity)
3. News Corp 11,251,706
Class A Common
18,748,294
Class B Common
(40.0% of total
equity)
________________
Total: 75,000,000
shares
(including
issued and
pending options)
TCI or News Corp. (directly or through
their respective subsidiaries), as the
case may be, shall acquire, either
through open market purchases or
purchases of newly issued shares of UVSG
(which UVSG hereby agrees to sell at the
same price per share as the price upon
which the consideration for the NAI
Contributed Entities is based at any
time prior to the 90th day following the
Closing and thereafter at the current
market price (based on the average of
the closing prices on the ten
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<PAGE>
consecutive trading days ending on the
trading date immediately prior to the
date of the issuance and sale of such
shares)), such additional shares of
Class A Common Stock as shall be
necessary to equalize the number of
shares held by each of them if UVSG and
Liberty, in their discretion, abandon
the Netlink Transaction or the
transaction described in paragraph A7 of
Schedule 1 has not been consummated
prior to the Closing and is thereafter
abandoned or if as a result of any other
circumstances the shares of Class A
Common Stock held by them are not equal
as of the later of (i) the 90th day
following the Closing and (ii) if as of
such 90th day the transaction described
in paragraph A7 of Schedule 1 is pending
but not yet closed, the date such
transaction is consummated or earlier
abandoned. All references in this
Agreement to any number of UVSG shares
shall be appropriately adjusted in the
event of stock splits, stock dividends,
combinations, any recapitalization,
reclassification or similar transaction
involving UVSG.
D. Principal Terms Relating to the
Stock Purchase
Representations and Warranties NAI hereby makes the representations
of NAI: and warranties set forth in Annex B,
and shall make such other customary
representations and warranties in the
Definitive Agreements as NAI and UVSG
may agree.
Representations and Warranties of UVSG hereby makes the representations
UVSG: and warranties set forth in Annex C,
and shall make such other customary
representations and warranties in the
Definitive Agreements as NAI and UVSG
may agree.
Tax Matters: The parties hereby make the covenants
and indemnification undertakings set
forth in Annex D, and will make such
other customary covenants as they may
agree.
Covenants: In addition to the covenants set forth
elsewhere in this Agreement (including,
without limitation, the covenants set
forth in Section B of this Annex A), the
parties will make certain covenants
customarily provided for in
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<PAGE>
similar transactions as they may agree,
including, without limitation, the
following (which the parties hereby
make):
1. Except as set forth in Schedule 1
hereto, the businesses of UVSG,
Publications, TVGEN and, subsequent
to its purchase by NAI, TVSM, will be
operated in the ordinary course of
business consistent with past
practice prior to Closing;
2. UVSG will enter into a registration
rights agreement with NAI and TCI
providing for NAI and TCI to have
certain demand registration rights
(subject to customary holdbacks,
blackout periods and indemnification
provisions) with respect to shares of
Class A Common Stock (subject to
first offer and first refusal rights
and mandatory conversion described
herein with respect to shares of
Common Stock proposed to be sold); in
addition, UVSG will agree to apply to
list such shares on UVSG's principal
trading markets, and will use
commercially reasonable efforts to
cause any such registration statement
and listing applications to become
effective as promptly as practicable
following NAI's or TCI's instructions
so to do;
3. UVSG, TCI, News Corp. and NAI, as
applicable, shall use all reasonable
efforts to obtain consents, approvals
and to satisfy all conditions
required to close the Transaction;
provided, however, that a party shall
not be obligated to take any action
pursuant to the foregoing if the
taking of such action or the
obtaining of any consent or approval
is reasonably likely to be materially
burdensome to such party and its
subsidiaries taken as a whole or to
impact in a materially adverse manner
the economic or business benefit of
the transactions contemplated by this
Agreement;
4. TCI, News Corp. and NAI shall provide
UVSG with all information required of
it for the preparation of the proxy
statement in connection with the UVSG
stockholders meeting at which the
Transaction will be submitted for
approval (the "Stockholders
Meeting");
5. Except as herein provided, News Corp.
will not negotiate to sell, sell or
solicit or entertain any
-10-
<PAGE>
offers to purchase the NAI
Contributed Entities or their
respective businesses;
6. TCI shall vote all of its UVSG
shares in favor of the Transaction
and any other matters required to
effect the transactions contemplated
hereby at the Stockholders Meeting
or otherwise;
7. No 338(h)(10) election under the
Internal Revenue Code of 1986 as
amended (the "Code") shall be made
with respect to the Transaction;
8. Unless UVSG and Liberty in their
discretion have abandoned the
Netlink Transaction, each of the
parties agrees that (except as
otherwise required by law) (i) it
shall use all reasonable efforts to
cause the Transaction and the
Netlink Transaction to constitute a
tax-free exchange under Section 351
of the Code and to cause all
transfers and exchanges pursuant to
such transactions to occur on the
same date, (ii) it will not take any
action, and will not permit any of
its subsidiaries or affiliates to
take any action, that such party
knows would cause the Transaction or
Netlink Transaction not to qualify
as a tax-free exchange pursuant to
Section 351 of the Code and (iii) it
will report the Transaction on all
tax returns and other tax filings as
a tax-free exchange under Section
351 of the Code; provided, however,
that if all conditions to Closing
other than the ability to close the
Netlink Transaction have been or can
be satisfied on or before November
1, 1998, the Closing hereunder shall
occur on November 2, 1998;
9. Following the Closing, UVSG will
have the right to continue to use
News Corp. services with respect to
the NAI Contributed Entities and
their respective businesses,
including bulk paper procurement and
the benefits of NAI's existing
Software License and Services
Agreement with Oracle Corporation
(to the extent permitted
thereunder), consistent with past
practice but in any event on terms
no less favorable to UVSG than MFN
terms; provided that its right to
use services (other than bulk paper
procurement) that require the
involvement of executives of News
-11-
<PAGE>
Corp. will be subject to agreement
upon an appropriate payment
structure based upon allocation of
costs (including services of senior
management);
10. Publications and, after the
acquisition of TVSM, TVSM shall
conduct their subscriber acquisition
and renewal promotional activities
in the ordinary course of business
(according, in the case of
Publications, to the fiscal 1999
budget) and shall not accelerate or
increase subscriber promotional
activities for the purpose of
maximizing the cash balances of the
NAI Contributed Entities in
contemplation of the Closing;
11. Except as provided in Schedule 1,
prior to the Closing or the earlier
termination of the Agreement, UVSG
shall not, without the prior written
consent of NAI which shall not be
unreasonably withheld, effect or
authorize any stock split, stock
dividend, combination,
recapitalization, reclassification
or similar transaction involving
UVSG;
12. NAI shall furnish UVSG with a copy
of the final Merger Agreement
between NAI and TVSM pursuant which
NAI shall acquire TVSM, together
with the schedules and exhibits
thereto (such Merger Agreement, in
the form executed by the parties
thereto, and as may be amended,
together with the schedules and
exhibits thereto, the "TVSM Merger
Agreement") and copies of any
amendments thereof, and notice of
any material waivers thereunder; and
13. On the Closing Date or as soon
thereafter as may be practicable,
News Corp. shall cause all license
agreements granting News Corp. or
its controlled affiliates the right
to use the "TV Guide" trade name or
trademark (other than those
agreements set forth in Items 2, 3,
7, 8 and 12 of Schedule 19 of the
NAI Disclosure Schedule) to be
terminated without liability to UVSG
or its controlled affiliates. The
use of marks pursuant to Items 2, 3,
7 and 8 shall be on arms' length
terms to be negotiated by NAI and
UVSG.
-12-
<PAGE>
ERISA Covenants 1. Prior to or as of the Closing Date,
- --------------- NAI shall cause the News America
Publishing Incorporated Employees
Pension and Retirement Plan (the
"Retirement Plan") and Supplemental
Executive Retirement Plan to cease
accruing benefits with respect to
employees of the NAI Contributed
Entities and Publications shall
cease to be a participating employer
under such plans;
2. Prior to the Closing Date,
Publications will cause NAI to
become the plan sponsor of the News
America Savings Plan (the "Savings
Plan"). On the Closing Date or as
soon as practicable thereafter, NAI
shall cause the Trustee of the
Savings Plan to segregate, in
accordance with the spin-off
provisions set forth under Section
414(l) of the Code, the assets
allocable to accrued benefits of
present and former employees of
Publications, and shall make any and
all filings and submissions to the
appropriate governmental agencies
arising in connection with such
segregation of assets and all
necessary amendments to the Savings
Plan and related trust agreement to
provide for the segregation of the
assets and transfer of such assets
to a newly created plan containing
substantially identical provisions.
The plan sponsor of the newly
created plan will be Publications
and the plan sponsor of the Savings
Plan will be a non-NAI Contributed
Entity;
3. On or before the Closing Date, NAI
will cause the welfare plans (as
such term is defined in Section 3(1)
of ERISA) of Publications to be
amended, to provide benefits solely
to employees of Publications or,
alternatively, to establish welfare
plans which are substantially
similar to existing welfare plans
for the benefit of employees of
Publications which provide benefits
solely to employees of Publications.
Alternatively, if so elected by
UVSG, which election UVSG may make
in its sole discretion with respect
to any such welfare plan, UVSG may
cause NAI to amend such welfare
plans to
-13-
<PAGE>
no longer provide benefits to
employees of Publications as of the
Closing Date;
4. At no cost to the NAI Contributed
Entities, NAI or the applicable
affiliate thereof shall cause all
stock options held by employees of
Publications if not theretofore
exercised to remain outstanding for
their full original terms subject to
compliance with the conditions
thereof, such as continued
employment by Publications; and
5. NAI shall be solely responsible for
and shall indemnify, defend and hold
UVSG and the NAI Contributed
Entities harmless from and against
(i) any liability to employees or
former employees or independent
contractors of NAI or any of its
affiliates other than any NAI
Contributed Entity, (ii) any
liability to any employee or former
employee or independent contractor
of any NAI Contributed Entity whose
employment or services have been
terminated at any time prior to or
effective as of the Closing and
(iii) any liability to any employee
or former employee or independent
contractor of any NAI Contributed
Entity or NAI or its affiliates with
respect to any welfare or pension
plan benefit provided by welfare and
pension plans sponsored by any of
the NAI Contributed Entities, NAI or
its affiliates attributable to
periods prior to the Closing.
Conditions Precedent to the The obligation of each party to effect
Obligations of the Parties to Close: the Closing of the Transaction is
conditioned upon:
(i) all necessary shareholder approvals
(in the case of UVSG only) and all
necessary consents to the
Transaction having been obtained;
(ii) the obtaining of all necessary
governmental and third party
consents and approvals including
termination or expiration of all
applicable waiting periods under
the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as
amended and the rules and
regulations thereunder (the "HSR
Act") without any action taken by
the Department of Justice or the
Federal Trade Commission
-14-
<PAGE>
remaining unresolved, and any
necessary NASDAQ approvals;
(iii) no provision of any applicable
law or regulation and no
judgment, injunction, order or
decree prohibiting the
consummation of the Transaction
or imposing on any party as a
result of the Transaction any
obligation which is reasonably
likely to be materially
burdensome to such party and its
subsidiaries taken as a whole or
to impact in a materially adverse
manner the economic or business
benefit of the transactions
contemplated by this Agreement;
(iv) the execution and delivery of all
documents contemplated hereby by
the other applicable parties,
including the Stockholders
Agreement referred to in
paragraph (E) of Annex A;
(v) all components of the Transaction
(and except as provided in
Covenant 8 of paragraph (D) of
Annex A, the Netlink Transaction
(unless theretofore abandoned))
being consummated substantially
simultaneously, provided that if
NAI's acquisition of TVSM has not
been consummated prior to the
time that the other conditions to
closing have been satisfied, the
cash portion of the purchase
price will be reduced by the
aggregate purchase price payable
by NAI to acquire TVSM (including
payments to employees), and the
Transaction (other than UVSG's
acquisition of TVSM) will be
consummated, and if NAI's
acquisition of TVSM is
subsequently consummated, UVSG
will then acquire TVSM for such
purchase price in cash (but only
if the acquisition by NAI is
consummated within 360 days after
the date hereof);
(vi) the respective representations
and warranties of the other
parties hereto set forth herein
shall be true on and as of the
date hereof and shall be true on
and as of the Closing Date with
the same effect as though such
representations and warranties
were made on and as of the
Closing Date;
-15-
<PAGE>
(vii) the other parties hereto shall
have performed and complied in
all material respects with all
agreements and covenants
contained in this Agreement that
are required to be performed or
complied with by them prior to
or at the Closing;
(viii) such party shall have received a
certificate dated the Closing
Date and signed by the Chairman,
President or a Vice-President of
the other party, certifying that
the conditions specified in (vi)
and (vii) above have been
fulfilled;
(ix) such party shall have received a
legal opinion from outside
counsel to the other party dated
the Closing Date, in form and
substance reasonably
satisfactory to such party, with
respect to the Transaction;
(x) such party shall have been
furnished with certificates
dated the Closing Date and
signed by the Secretary or an
Assistant Secretary of the other
party setting forth (i) the
names, signatures and positions
of the officers of the other
party who have executed this
Agreement or any other document
executed by the other party in
connection with the Transaction,
and (ii) a copy of the
resolutions adopted by the Board
of Directors and, to the extent
applicable, the shareholders of
the other party authorizing the
execution, delivery and
performance of this Agreement
and the other documents executed
in connection with the
Transaction;
(xi) in the case of UVSG, NAI shall
have delivered to UVSG duly
executed resignations of such of
the members of the Board of
Directors of the NAI Contributed
Entities as UVSG shall have
requested;
(xii) neither the NAI Contributed
Entities (in the case of UVSG)
or UVSG (in the case of NAI), in
each case taken as a whole, nor
Publications (in the case of
UVSG) shall have had any
material adverse change to their
businesses, assets, properties,
operations or condition
(financial or otherwise) since
March 31, 1998; and
(xiii) four designees of NAI (who shall
constitute 4 of the ten members
of the Board following the
Closing) shall become members of
the Board of Directors of UVSG
on the Closing Date immediately
following the Closing. Two of
the
-16-
<PAGE>
members of the Board immediately
following the Closing shall be
independent directors.
Survival of Representations and The representations and warranties of
Warranties; Indemnification the parties shall survive for a period
ending 24 months following the Closing,
except for (i) representations and
warranties relating to the shares of
Publications and TVSM and the UVSG
Shares, which shall survive
indefinitely, (ii) the tax
representation with respect to the NAI
Contributed Entities set forth in
Section 13(h) of Annex B and the tax
representations with respect to UVSG and
its subsidiaries set forth in Section 12
of Annex C (other than Section 12(g) of
Annex C) which will survive for the
applicable statute of limitations period
and (iii) the remaining tax
representations with respect to the NAI
Contributed Entities (other than Section
13(g) of Annex B) which shall not
survive the Closing. Covenants of the
parties will survive the Closing in
accordance with their terms and each
party making a covenant will indemnify
the other for losses resulting from a
breach thereof. Such indemnification
obligation will not be subject to any
basket or deductible.
Each party shall indemnify the other for
losses resulting from breaches of its
representations and warranties; provided
that no indemnification shall be due and
payable (a) with respect to any
individual claim unless such claim
equals or exceeds $100,000 and (b)
unless the aggregate amount of such
claims equal to or in excess of $100,000
exceeds a "basket" of $20 million
(provided that if the aggregate amount
of claims by the other party exceed such
"basket" limitation such indemnification
obligation shall apply with respect only
to the amount of such excess). In
determining whether the basket has been
met (and only for such purpose), the
representations and warranties of such
party shall be deemed to have been made
free of all materiality qualifiers.
Notwithstanding the foregoing, such
indemnification obligation will not be
subject to any basket with respect to
losses arising out of breach of any of
the following representations or
warranties: Item 23 of Annex B and Item
18 of Annex C ("Brokers' and Finders'
Fees"); the representation and warranty
in Item 2 of Annex B that upon
consummation of the Transaction, UVSG
will hold (directly or indirectly) of
record and beneficially all of the
outstanding shares of capital stock of
each of the NAI
-17-
<PAGE>
Contributed Entities free and clear of
any Liens and Restrictions; the
representation and warranty in Item 2(b)
of Annex C that the UVSG shares to be
issued to NAI or its affiliate at the
Closing will be duly authorized, validly
issued and fully paid and nonassessable;
and the representations and warranties
set forth in Items 13(g) and 13(h) of
Annex B. Notwithstanding any other
provision of this Agreement, the
indemnity of losses resulting from
breaches of UVSG's tax representations
and warranties in Section 12 of Annex C
shall be limited to the diminution in
the value of NAI's (or its affiliate's)
investment in the UVSG Common Stock to
be issued pursuant hereto based upon the
UVSG stock price.
NAI will also indemnify and defend
and hold UVSG and the NAI Contributed
Entities harmless from and against (i)
any liabilities of NAI or any of its
affiliates to former stockholders or
employees of TVSM arising solely out of
the obligations to make payments at
closing to such stockholders and
employees under Section 2.1 of the TVSM
Merger Agreement ("Merger Consideration
Amount"), Section 9.9 of the TVSM Merger
Agreement ("Payment") or Section 10.4 of
the TVSM Merger Agreement ("Payment of
Employee Bonuses"); provided that (a)
NAI shall have no liability as a result
of the exercise of statutory appraisal
rights by TVSM stockholders to the
extent that the amount required to be
paid pursuant to the exercise of
statutory appraisal rights exceeds the
Merger Consideration Amount that would
have been paid to the dissenting TVSM
stockholders pursuant to the TVSM Merger
Agreement and (b) provided the payments
in Section 10.4 of the TVSM Merger
Agreement are made, NAI shall be
entitled to the indemnification set
forth in Section 11.2(c) of the TVSM
Merger Agreement to the extent it incurs
any liability indemnified against
pursuant thereto (references herein to
specific sections of the TVSM Merger
Agreement refer to the sections in the
draft thereof dated June 7, 1998 and
shall be deemed to refer to any
corresponding section (whether or not
numbered in the same manner) in the
final TVSM Merger Agreement), (ii) any
liabilities of NAI or any of its
affiliates or predecessors under any
Environmental and Health Laws (as
defined in the Annex B hereto),
including, without limitation, all
matters referred to in Schedule 17(b) of
the NAI Disclosure Schedule and
liabilities arising out of the
ownership, operation (including, without
limitation, storage, treatment,
transportation or disposal of hazardous
-18-
<PAGE>
materials whether onsite or offsite), leasing
or occupancy of any printing facilities or
storage of any materials used in the printing
process and (iii) all severance obligations
relating to the termination of the persons
identified on Schedule 2 hereof in respect of
certain fulfillment operations.
Governing Law: The stock purchase agreement will be
governed by the laws of the State of New
York.
E. Stockholders Agreement among 1. Board of Directors From and after
UVSG NAI, News Corp. and TCI the Closing Date
(unless the number of
directors is adjusted
pursuant hereto),
News Corp. and TCI
will each designate
four board members
(representing 40% of
the number of
directors
constituting the
entire Board of
Directors). The
members of the Board
shall select or
nominate two
Directors, who must
qualify as
independent
directors. Subject to
the foregoing
requirement with
respect to
independent
directors, the number
of directors that may
be designated by each
of News Corp. and TCI
shall be adjusted on
a pro rata basis to
reflect sales or
conversions of Class
B Common Stock, such
that each of News
Corp. and TCI (and
any transferee of
such parties that
acquires 10% or more
of the Class B Common
Stock in accordance
with the Stockholders
Agreement) shall be
entitled to elect one
director for each 10%
of the outstanding
Class B Common Stock
owned by such party
(rounded to the
nearest 10%, with
more than 5% rounded
up and 5% or less
rounded down, unless
the transferor and
transferee shall
otherwise agree).
-19-
<PAGE>
2. Non-Compete UVSG will be the
exclusive vehicle
through which News
Corp. and TCI
directly or
indirectly through
their respective
subsidiaries and
controlled affiliates
conduct guide
businesses (print,
electronic or
otherwise), whether
within or outside the
United States (other
than for the NDS
Business), so long as
TCI, on the one hand,
and News Corp., on
the other, is
entitled to designate
at least one director
(i.e., owns in excess
of 5% of the Class B
Common Stock). In the
event of a
disposition by TCI or
News Corp. (each, a
"Parent") to its
stockholders of a
subsidiary through
which immediately
prior to such
disposition it owned
its investment in the
Class B Common Stock
of UVSG, such Parent
shall cause the
corporation, limited
liability company or
partnership that is
the "ultimate parent
entity" (as such term
is defined in the HSR
Act), or if the
ultimate parent
entity is an
individual, the
entity or entities
controlled (as such
term is defined in
the HSR Act) directly
by the ultimate
parent entity through
which such person is
the ultimate parent
entity, of such
subsidiary
immediately following
such distribution to
become a party to the
Stockholders
Agreement.
3. Transfer Restrictions Except for a
disposition in
compliance with the
last sentence of Item
2 above, so long as a
party is entitled to
designate at least
one director,
-20-
<PAGE>
the other party may
not directly or
indirectly transfer
any shares of any
class of Common Stock
to an unaffiliated
third party or
convert into shares
of Class A Common
Stock any shares of
Class B Common Stock
unless (A) in the
case of proposed
sales in the market
(whether as a
registered offering
or in a transaction
with a broker or
market maker) it
first offers to sell
such shares to the
first party at a
price per share equal
to the average
closing price per
share of Class A
Common Stock for the
five (5) consecutive
trading days ending
on the trading date
immediately preceding
the date of such
offer; or (B) in the
case of receipt of a
bona fide offer from
a third party (which
such party desires to
accept) to purchase
any Common Stock, it
first offers to sell
such shares to the
first party at the
applicable per share
offered price (in
cash), and otherwise
on the terms and
conditions of such
offer. If the non-
transferring party
does not accept such
offer (and it shall
only be entitled to
accept such offer as
to all and not less
than all of the
shares proposed to be
sold unless otherwise
provided in the
Stockholders
Agreement), the
transferring party
shall convert all
shares of Class B
Common Stock subject
to such transaction
to shares of Class A
Common Stock in
connection with any
transfer, except in
the case of a
transfer pursuant to
a bona fide third
party offer of a
number
-21-
<PAGE>
of shares of Class B
Common Stock equal to
10% or more of the
Class B Common Stock
outstanding. The non-
transferring party
will have pro rata
tag along rights (in
proportion to the
number of shares of
Class B Common Stock
held by each party)
in connection with
any sale by a party
of more than 50% of
the shares of Class B
Common Stock held by
such party. Any offer
from another party
hereto arising by
reason of a proposed
transaction with a
broker or market
maker must be
accepted within three
(3) business days
following the date a
party receives the
offer from the other
party hereto, and a
closing shall occur
within two (2)
business days
thereafter. Any offer
relating to Common
Stock pursuant to a
bona fide offer from
a third party (except
for a transaction
which will require
notification under
the HSR Act, which
transaction, unless
the bona fide offer
shall provide for a
longer period, shall
be treated in
accordance with the
following sentence)
must be accepted
within five (5)
business days after a
party hereto has
received the offer
from the other party
hereto and closed
within the period set
forth in the bona
fide offer. Any offer
under any other
circumstances
(including a bona
fide offer which does
not by its terms set
forth a period in
which to close) must
be accepted within
five (5) business
days after a party
hereto has received
the offer
-22-
<PAGE>
from the other party
hereto and closed
within twenty (20)
business days
thereafter, or such
longer period as may
be agreed, subject to
an extension for an
additional period of
up to ninety (90)
days in order to
obtain such
governmental or
regulatory approvals
as may be required
(including, but
without limitation,
expiration or early
termination of all
applicable waiting
periods under the HSR
Act).
4. Change of Control None
Provisions
5. Stockholders Vote Unless otherwise
provided in the
Stockholders
Agreement, each of
News Corp. and TCI
will be obligated to
mutually agree on any
vote of their shares
in UVSG or failing
agreement shall be
obligated to vote
against any proposal
so long as such party
continues to own a
sufficient number of
shares of Class B
Common Stock such
that it is entitled
to designate at least
one director.
6. Board of Directors The approval of any
Vote action by the Board
will require the
affirmative vote of
at least seven of the
ten directors, except
for the removal of
the CEO, which will
require approval of
six of the ten
directors. The Board
of Directors will
create an Executive
Committee, consisting
of the CEO and the
President of UVSG and
one representative of
each of TCI and NAI,
which committee shall
have such duties and
-23-
<PAGE>
powers as shall be
delegated to such
committee from time
to time by the vote
of the entire Board
of Directors. All
action by the
Executive Committee
shall require
unanimous vote or
consent of all the
members of the
Executive Committee.
7. Existing Stockholders Will be terminated
Agreement
F. Ancillary Agreements The following shall be on mutually agreeable
terms negotiated in good faith, but shall not
be a condition to the closing of the
Transaction. The obligations of News Corp.
and TCI with respect to entities they control
shall be subject to existing commitments; the
obligations with respect to entities they do
not control shall be based on reasonable
efforts, subject to existing commitments.
1. Affiliation Agreements with TCI and News
Corp. for both Prevue Channel and Prevue
Interactive.
2. Carriage/Marketing Agreements for monthly
and/or weekly cable and DTH guide
magazines (TV Guide branded).
3. Agreement by UVSG to convert its existing
Prevue channel, Prevue Online and Prevue
Interactive products to the "TV Guide"
brand as mutually agreed upon; provided,
however, Prevue International will only
use TV Guide brand where appropriate.
-24-
<PAGE>
ANNEX B - REPRESENTATIONS AND WARRANTIES OF NAI
As used in this Agreement, (i) the term "NAI Contributed Entities" means
Publications and TVSM, together with each of their respective subsidiaries (and
TVGEN, which shall be deemed to be owned by Publications) and (ii) the term "NAI
Contributed Businesses" means the businesses conducted by the NAI Contributed
Entities (which constitute all businesses conducted by NAI and its controlled
affiliates engaged in the print or electronic program guide business other than
the NDS Business). All references to NAI and its affiliates or controlled
affiliates shall be deemed to include a reference to the NAI Contributed
Entities.
Notwithstanding the foregoing and the following representations and
warranties, no representation or warranty is made by NAI hereunder with respect
to TVSM unless and until NAI's proposed acquisition of TVSM is consummated,
except that NAI has furnished to UVSG a true and complete copy of the most
recent draft Merger Agreement dated June 7, 1998, together with the draft
schedules thereto, in the most recent form delivered to NAI by TVSM.
Representations and warranties of NAI with respect to TVSM following the
consummation of NAI's proposed acquisition of TVSM shall relate solely to facts
and circumstances which arise after the consummation of NAI's proposed
acquisition of TVSM.
The representations and warranties set forth in this Annex B are made subject
to Schedule 1.
1. Organization. Each of NAI and the NAI Contributed Entities is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority and all necessary licenses and permits to carry on its business as it
has been and is now being conducted and to own or lease and to operate the
properties used in connection therewith. Each of NAI and the NAI Contributed
Entities is duly qualified or licensed and in good standing to do business in
each of the jurisdictions where the conduct of its business or the ownership,
leasing or operation of its properties requires such qualification or licensing,
except where the failure to be so duly qualified or licensed and in good
standing, individually or in the aggregate, would not have a material adverse
effect on the business, operations, properties or condition (financial or
otherwise) of any of the NAI Contributed Entities or any of the NAI Contributed
Businesses or the ability of NAI to consummate the transactions contemplated
herein (collectively, a "Publications Material Adverse Effect").
2. Capitalization; Options and Other Rights. The total authorized shares
of the NAI Contributed Entities and the number of such shares that are issued
and outstanding are set forth in the NAI Disclosure Schedule. All of the issued
and outstanding shares of capital stock of the NAI Contributed Entities have
been duly and validly authorized and issued and are fully paid and
nonassessable, and are held of record and beneficially by NAI or by a direct or
indirect wholly owned U.S. subsidiary of NAI (or, subject to compliance with the
terms and conditions of this Agreement, a U.S. direct or indirect subsidiary of
News Corp.) free and clear of any Liens (as hereinafter defined)
-25-
<PAGE>
and Restrictions (as hereinafter defined), with the sole right to vote, dispose
of, and receive dividends or distributions with respect to such shares. There
are no existing agreements, subscriptions, options, warrants, calls,
commitments, trusts (voting or otherwise), or rights of any kind whatsoever
granting to any Person (as hereinafter defined) any interest in or the right to
purchase or otherwise acquire, at any time, or upon the happening of any stated
event, any capital stock of the NAI Contributed Entities, whether or not
presently issued or outstanding, nor are there any outstanding securities of the
NAI Contributed Entities or any other entity which are convertible into or
exchangeable for shares of capital stock of the NAI Contributed Entities, nor
are there any agreements, subscriptions, options, warrants, calls, commitments
or rights of any kind whatsoever granting to any person any interest in or the
right to purchase or otherwise acquire from NAI or any of its affiliates or any
other entity any securities so exercisable convertible or exchangeable, nor are
there any proxies, agreements or understandings with respect to the voting of
such shares. Upon consummation of the Transaction, UVSG will hold, directly or
indirectly, of record and beneficially all of the outstanding shares of capital
stock of each of the NAI Contributed Entities free and clear of any Liens and
Restrictions, with the sole right to vote, dispose of, and receive dividends or
distributions with respect to such shares. In this Agreement, any reference to
"Restrictions," with respect to any capital stock, partnership interest,
membership interest in a limited liability company or other security, shall mean
any voting or other trust or agreement, option, warrant, preemptive right,
right of first offer, right of first refusal, escrow arrangement, proxy, buy-
sell agreement, power of attorney or other contract, any law, rule, regulation,
order, judgment or decree which, conditionally or unconditionally, (i) grants to
any Person the right to purchase or otherwise acquire, or obligates any Person
to sell or otherwise dispose of or issue, or otherwise results or, whether upon
the occurrence of any event or with notice or lapse of time or both or
otherwise, may result in any person acquiring, (A) any of such capital stock or
other security; (B) any of the proceeds of, or any distributions paid or which
are or may become payable with respect to, any of such capital stock or other
security; or (C) any interest in such capital stock or other security or any
such proceeds or distributions; (ii) restricts or, whether upon the occurrence
of any event or with notice or lapse of time or both or otherwise, is reasonably
likely to restrict the transfer or voting of, or the exercise of any rights or
the enjoyment of any benefits arising by reason of ownership of, any such
capital stock or other security or any such proceeds or distributions; or (iii)
creates or, whether upon the occurrence of any event or with notice or lapse of
time or both or otherwise, is reasonably likely to create a Lien or purported
Lien affecting such capital stock or other security, proceeds or distributions.
Notwithstanding anything to the contrary contained in these representations and
warranties, the parties acknowledge that the existing stockholders of TVSM as of
the date hereof may have statutory rights of appraisal as a result of NAI's
acquisition of TVSM.
3. Authorization; Freedom to Contract.
(a) NAI and each of its applicable affiliates has all requisite
corporate power, authority and legal capacity to execute and deliver this
Agreement and each other agreement, document, instrument or certificate
contemplated by this Agreement or to be executed by NAI or its affiliates in
connection with the consummation of the Transaction (together with this
Agreement, the "NAI Transaction Documents"), and to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery by NAI and each of its applicable
affiliates of this Agreement and the other NAI Transaction Documents, the
consummation by NAI and its applicable affiliates of the transactions
contemplated hereby and thereby, and the performance by it of its obligations
hereunder and thereunder, have been duly
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authorized by the Board of Directors of NAI and each of its applicable
affiliates, and no further corporate action is or will be necessary on the part
of NAI or its affiliates to authorize the execution and delivery of this
Agreement or the other NAI Transaction Documents, the consummation of the
transactions contemplated hereby and thereby and the performance of NAI's or its
affiliates' obligations hereunder and thereunder. This Agreement has been, and
each of the other NAI Transaction Documents will be at or prior to the Closing,
duly and validly executed and delivered by NAI and each of its applicable
affiliates. This Agreement constitutes, and each of the NAI Transaction
Documents when so executed and delivered will constitute, legal, valid and
(assuming the due execution of such agreements by the other parties hereto that
are not affiliates of NAI) binding obligations of NAI and/or its applicable
affiliates, enforceable against NAI and/or its applicable affiliates in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(b) The execution and delivery of this Agreement and the other NAI
Transaction Documents by NAI and/or its applicable affiliates do not, and the
performance by NAI and/or its applicable affiliates of its obligations hereunder
and thereunder and the consummation of the transactions contemplated hereby and
thereby will not, (i) violate or conflict with any provision of the certificate
or articles of incorporation or by-laws of NAI and/or its affiliates or any
amendments thereto or restatements thereof, (ii) violate any of the terms,
conditions or provisions of any law, rule or regulation applicable to NAI or its
affiliates or any order, writ, injunction, judgment or decree of any
Governmental Authority (as hereinafter defined) to which any of NAI or its
affiliates is subject or by which any of the foregoing or their respective
assets are bound, or (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, or result in the
creation of any mortgage, pledge, lien, encumbrance, charge, or other security
interest (a "Lien") on any of the properties or assets of NAI or its affiliates
pursuant to, or require any consent by or approval or authorization of (a
"Contract Consent") any party under, any of the terms, conditions or provisions
of any note, bond, indenture, debenture, security agreement, trust agreement,
lien, mortgage, lease, agreement, license, franchise, permit, guaranty, joint
venture agreement, or other agreement, instrument or obligation, oral or
written, to which NAI or any of its affiliates is a party (whether as an
original party or as an assignee or successor) or by which NAI or any of its
affiliates or any of their respective properties is bound, except for such
breaches or defaults as are not reasonably likely to have a Publications
Material Adverse Effect.
(c) No governmental authorization, approval, order, license,
franchise, consent or permit (collectively, "Permits"), and no registration,
declaration or filing (collectively, "Filings") with any court, governmental
department, commission, authority, board, bureau, agency or other
instrumentality (collectively, "Governmental Authorities"), is required in
connection with the execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby by the
Company, except the requirements under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), and except where the failure to obtain
such Permits or to make such Filings is not reasonably likely to have a
Publications Material Adverse Effect.
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(d) There are no consents, authorizations or other approvals from or
notices to any Person other than a Governmental Authority (including, without
limitation, any Person that has entered into any contract, agreement,
arrangement or understanding with the NAI Contributed Entities) required to
permit the consummation of the transactions contemplated by this Agreement,
except where the failure to obtain such consents, authorizations or approvals is
not reasonably likely to have a Publications Material Adverse Effect.
4. Subsidiaries. Except as set forth in the disclosure schedules
delivered herewith by NAI (collectively, the "NAI Disclosure Schedule"), the
NAI Contributed Entities do not, directly or indirectly, have any ownership or
other interest in, or any equity or similar interest or other right convertible
into or exercisable or exchangeable for or control of, any individual,
corporation, limited liability company, partnership, joint venture, business
association or other entity (each, a "Person"). The NAI Contributed Entities
beneficially own all rights, title and interest that NAI or its affiliates have
or had in the EPG joint venture (a/k/a "TV Guide On-Screen") with an affiliate
of TCI. Except as set forth in the NAI Disclosure Schedule, each interest in
any other Person owned by an NAI Contributed Entity is owned by the applicable
entity free and clear of any Liens and Restrictions, and each such Person is
duly organized, validly existing and in good standing in its respective
jurisdiction of organization and has all requisite power and authority to carry
on its business and to own or lease its assets and to operate the properties
used in connection therewith.
5. Charter and Organizational Documents. NAI has furnished UVSG with true
and complete copies of the certificate of incorporation and by-laws of each of
the NAI Contributed Entities and accurate and complete records of all material
corporate proceedings of each of the NAI Contributed Entities.
6. Financial Statements. NAI has furnished to UVSG true and complete
copies of the following unaudited (except in the case of TVSM, the financial
statements of which that are set forth in subparagraph (f) below are audited)
financial statements (the "Unaudited Contributed Business Financial
Statements"):
(a) profit and loss statements of Publications (excluding TVGEN) for
the fiscal years ended June 30, 1995, 1996 and 1997 and the nine
months period ended March 31, 1998;
(b) balance sheets of Publications (excluding TVGEN) as of March 31,
1998;
(c) statements of cash flows of Publications (excluding TVGEN) for
the fiscal year ended June 30, 1997 and the nine month period
ended March 31, 1998;
(d) profit and loss statements of TVSM for the three months period
ended March 31, 1998;
(e) balance sheets of TVSM as of March 31, 1998; and
(f) financial statements (which include balance sheets, statements of
cash flows and profit and loss statements) of TVSM for the twelve
month period ended December 31, 1997.
The Unaudited Contributed Businesses Financial Statements were prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with that of preceding accounting periods (except as may be indicated
therein or in the notes thereto) ("GAAP"), except that the financial statements
of Publications (excluding TVGEN) do not contain any provision for taxes,
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interest or amortization of goodwill (none of which will represent any actual or
contingent liability or commitment of the NAI Contributed Entities at Closing).
Each of the financial statements contained in the Unaudited Contributed
Businesses Financial Statements was prepared, and the audited financial
statements of the NAI Contributed Businesses that will be included in the proxy
statement of UVSG relating to the approval of the Transaction by the UVSG
stockholders (the "UVSG Proxy Statement") will be prepared, in accordance with
GAAP, and each of the financial statements contained in the Unaudited
Contributed Businesses Financial Statements fairly present, and the audited
financial statements of the NAI Contributed Businesses that will be included in
the UVSG Proxy Statement will fairly present (except as may be indicated therein
or in the notes thereto), the financial position of the NAI Contributed
Businesses and the NAI Contributed Entities as of the dates thereof and the
results of operations and changes in financial position of the NAI Contributed
Businesses and the NAI Contributed Entities for each of the periods then ended.
7. Absence of Default. Except as set forth in the NAI Disclosure
Schedule, each of the NAI Contributed Entities has complied with and performed
all of its obligations required to be performed under all contracts, agreements
and leases to which it is a party (whether as an original party or as an
assignee or successor) as of the date hereof, and it is not in default in any
respect under any contract, agreement, lease, undertaking, commitment or other
obligation, except for such breaches or defaults that are not reasonably likely
to have a Publications Material Adverse Effect. NAI has no knowledge that any
party has failed to comply in any material respect with or perform all of its
obligations required to be performed under any contract, agreement or lease to
which any of the NAI Contributed Entities is a party or by which any of the NAI
Contributed Entities or the NAI Contributed Businesses is bound or to which any
of their respective assets is subject (whether as an original party or an
assignee or successor) as of the date hereof.
8. Absence of Certain Developments. Since the date of the latest balance
sheet included in the Unaudited Contributed Businesses Financial Statements, the
NAI Contributed Businesses have been conducted in the ordinary course of
business consistent with past practice, and, except to the extent reflected or
otherwise disclosed in the NAI Disclosure Schedule, there has not been:
(a) any material adverse change in the business, assets, results of
operation or condition (financial or otherwise) of the NAI Contributed
Businesses (without regard to changes resulting from macroeconomic or general
industry conditions) (a "Publications Material Adverse Change"), and there has
not occurred any event which is reasonably likely to result in a Publications
Material Adverse Change;
(b) any declaration, setting aside, or payment of any dividend or
distribution (other than of cash) to NAI or any of its affiliates, or any direct
or indirect redemption, retirement, purchase or other acquisition by any NAI
Contributed Entity of any of its capital stock or other securities or options,
warrants or other rights to acquire capital stock;
(c) any increase in salary, wage, benefit or other remuneration
payable or to become payable to any current or former officer, director,
employee or agent of any of the NAI Contributed Businesses or any increase in
any bonus or severance payment or arrangement made to, for or with any of its
officers, directors, employees or agents or any grant of a supplemental
retirement plan or program or special remuneration for any officer, director,
employee or agent of any of the NAI Contributed Businesses, in each case other
than in the ordinary course of business
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and consistent with past practice (including regular annual salary and
performance bonus increases);
(d) any sale, lease or other transfer or disposition of any material
asset of any of the NAI Contributed Businesses;
(e) any change in accounting methods, practices or policies
(including any change in depreciation or amortization policies or rates) by any
of the NAI Contributed Businesses or any revaluation by any of the NAI
Contributed Businesses of any of its assets;
(f) any material modification or change to any material contract by
any of the NAI Contributed Businesses, other than in the ordinary course of
business;
(g) any written waiver or written release of any right or claim of
substantial value by any of the NAI Contributed Businesses;
(h) any payment, discharge or satisfaction of any material claim,
liability or obligation by any of the NAI Contributed Businesses, other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
its balance sheet as of March 31, 1998 referred to in Section 6(b) or 6(e) above
(the "Latest Balance Sheet") or incurred since the date of such balance sheet in
the ordinary course of business and consistent with past practice and other than
scheduled repayments of indebtedness reflected on the Latest Balance Sheet;
(i) any issuance or sale of capital stock or other securities or
membership or other ownership interests, exchangeable or convertible securities,
options, warrants, puts, calls or other rights to acquire capital stock or other
securities or other ownership interests of any of the NAI Contributed Entity;
(j) any guarantee by any NAI Contributed Entity of any indebtedness
for borrowed money, except for guarantees of public indebtedness, which will
terminate as of the Closing;
(k) any delay in the payment of any trade or other payables other
than in the ordinary course of business and consistent with past practice; or
(l) any agreement by NAI or any of its affiliates or any of the NAI
Contributed Businesses to do any of the foregoing.
9. Liabilities. Except as reflected in the Unaudited Contributed
Businesses Financial Statements and except for liabilities or obligations that
fall within any of the exceptions contained in any of the other representations
or warranties contained in this Annex B (e.g., knowledge, materiality and
disclosed liabilities) or that arose in the ordinary course of business after
March 31, 1998 (and which have not resulted and are not reasonably likely to
result in a Publications Material Adverse Change), no NAI Contributed Entity has
any actual or potential liability or obligation of any kind or nature, whether
due or to become due, whether absolute, accrued, fixed or contingent or
otherwise. TVGEN has no liabilities or other obligations of any nature (other
than current liabilities
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incurred in the ordinary course of business and obligations under executory
contracts which have been made available to UVSG).
10. Litigation.
(a) Except as set forth in the NAI Disclosure Schedule: (i) there are
no private or governmental actions, suits, arbitrations, claims, legal or
administrative proceedings or investigations ("Legal Proceedings") pending or,
to NAI's knowledge, threatened against any of the NAI Contributed Entities or
the NAI Contributed Businesses; and (ii) none of the NAI Contributed Entities or
the NAI Contributed Businesses, nor any of their respective assets, properties
or business, is subject to any judgment, writ, injunction or decree of any
Governmental Authority; except in either case for such Legal Proceedings as are
not reasonably likely, individually or in the aggregate, to have a Publications
Material Adverse Effect.
(b) None of NAI or any of its affiliates is a party to any Legal
Proceedings pending or, to its knowledge, threatened which, if adversely
determined, would adversely affect or restrict the ability of NAI or its
affiliates to consummate the transactions contemplated by this Agreement or to
perform its obligations hereunder.
(c) There is no judgment, order, injunction or decree of any
Governmental Authority to which NAI or any of its affiliates is subject which
might adversely affect or restrict the ability of NAI or any of its affiliates
to consummate the transactions contemplated by this Agreement or to perform its
obligations hereunder.
11. Restrictions on Business Activities. There is no material agreement,
nor is there any judgment, injunction, order or decree, binding upon NAI or any
of its affiliates which has or could have the effect of prohibiting or
materially impairing any current business practice of any of the NAI Contributed
Businesses or the conduct of business by any NAI Contributed Entity as currently
conducted (including following the consummation of the transactions contemplated
by this Agreement).
12. Compliance with Law. NAI and its affiliates (i) are in compliance with
all federal, state, local or foreign laws (including common law), statutes,
codes, ordinances, rules, regulations or other requirements applicable to the
NAI Contributed Businesses or the NAI Contributed Entities or to the conduct of
the business or operations of the NAI Contributed Businesses or the NAI
Contributed Entities or the use of their respective properties (including any
leased properties) and assets and (ii) have all governmental permits and
approvals from Governmental Authorities which are required by the NAI
Contributed Businesses or the NAI Contributed Entities to operate their
respective businesses, except in such cases where the failure to comply or
obtain is not reasonably likely to have a Publications Material Adverse Effect.
13. Taxes. Except as otherwise set forth in the NAI Disclosure Schedule:
(a) Each of the NAI Contributed Entities has filed all material Tax
Returns that it was required to file. All such Tax Returns are correct and
complete in all material respects. All material Taxes owed by any of the NAI
Contributed Entities (whether or not shown on any Tax Return) have been paid.
There are no liens for material Taxes (other than for current Taxes not yet
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due and payable or for items being contested in good faith and for which there
are adequate reserves in accordance with GAAP on the books of the applicable
entity) on any of the assets of any of the NAI Contributed Entities.
(b) Each of the NAI Contributed Entities has withheld and paid all
material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor or other third
party.
(c) No material deficiencies for any Taxes have been proposed,
asserted or assessed against the NAI Contributed Entities that are not
adequately reserved for in accordance with GAAP in all cases applied in a
consistent basis with the NAI Latest Balance Sheet. The NAI Disclosure Schedule
indicates the Tax Returns of the NAI Contributed Entities that currently are the
subject of an audit.
(d) None of the NAI Contributed Entities has any current non-
contingent liability for the Taxes of any Person (other than any of the NAI
Contributed Entities) under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(e) If the income of the NAI Contributed Entities is required under
federal, state, local or foreign tax rules, to be included on a consolidated,
unitary, combined or other such Tax Return which includes NAI or any of its
affiliates filed by an entity other than any of the NAI Contributed Entities,
each such group has filed all Tax Returns that it was required to file with
respect to NAI Contributed Entities for each period during which NAI Contributed
Entities was a member of such Group. All such Tax Returns were correct and
complete in all material respects in so far as they relate to NAI Contributed
Entities. All material Taxes owed by such group with respect to NAI Contributed
Entities (whether or not shown on a Tax Return) have been paid for each taxable
period during which any of the NAI Contributed Entities was a member of its
respective group.
(f) The normal period within which to examine and/or assess Taxes on
the income of NAI Contributed Entities has not been extended with respect to any
such entity by waiver of, or agreement to extend, the applicable statute of
limitations or otherwise.
(g) None of the NAI Contributed Entities has made or is required to
make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payment that will not be deductible
under Code Section 280G.
(h) The NAI Contributed Entities are not a party to any tax sharing
or allocation agreement.
Definitions
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Tax" means any income, corporation, gross receipts, profits, gains,
capital stock, capital duty, franchise, business, license, payroll, withholding,
social security, unemployment, disability,
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property, wealth, welfare, stamp, environmental, transfer, excise, occupation,
sales, use, value added, alternative minimum, estimated or other similar tax
(including any fee, assessment or other charge in the nature of any tax) imposed
by any governmental authority (whether national, federal, state, local,
municipal, foreign or otherwise) or political subdivision thereof, and any
interest, penalties, additions to tax or additional amounts in respect of the
foregoing.
"Tax Returns" shall mean all reports, declarations of estimated tax,
information statements and returns relating to, or required to be filed in
connection with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third parties.
14. Employee Benefit Plans.
(a) Except as set forth on the NAI Disclosure Schedule, the NAI
Contributed Entities do not maintain, contribute to, or have any liability to or
in connection with, nor, have the NAI Contributed Entities maintained,
contributed to, or had any liability to or in connection with any employee
pension benefit plan, fund or program (exclusive of benefits contained in
contracts disclosed pursuant to Section 18 hereof), as such term is defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), specifically including any multiemployer plan, as defined in Section
3(37) of ERISA, regardless of whether such pension plan, fund or program (i) is
or is intended to be covered or qualified under the Code, ERISA or any other
applicable law, (ii) is or is intended to be funded or unfunded, or (iii) covers
any current or former employee of or independent contractor to the NAI
Contributed Entities (the "Pension Plans"). The NAI Contributed Entities have
not, within the past six years, contributed to, maintained or been obligated to
contribute to such a multiemployer plan.
(b) The NAI Disclosure Schedule contains a list (exclusive of
benefits contained in contracts disclosed pursuant to Section 18 hereof) of all
other employee benefit plans, funds or programs as such term is defined in
Section 3(3) of ERISA which it has maintained, contributed to, or in connection
with which it has or has had any liability, specifically including any
multiemployer plan, as defined in Section 3(37) of ERISA, regardless of whether
such employee benefit plan, fund or program (i) is or is intended to be covered
or qualified under the Code, ERISA or any other applicable law, (ii) is or is
intended to be funded or unfunded, or (iii) covers any current or former
employee of or independent contractor to the NAI Contributed Entities ("Benefit
Plans").
(c) The NAI Disclosure Schedule lists (exclusive of benefits
contained in contracts disclosed pursuant to Section 18 hereof), with respect to
Publications, (i) any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical, employee
relocation, cafeteria benefit (Section 125 of the Code) or dependent care
(Section 129 of the Code), life insurance or accident insurance plans, programs
or arrangements, (ii) all deferred compensation, bonus, pension, profit sharing,
savings or incentive plans, programs or arrangements, (iii) other fringe or
employee benefit plans, programs or arrangements that apply to employees of the
NAI Contributed Entities, in each case, that are currently maintained or
directly contributed to by the NAI Contributed Entities or have been maintained
or contributed to by the NAI Contributed Entities since January 1, 1993
(collectively, with the plans, funds and programs referred to in (a) and (b)
above the "Employee Plans").
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(d) NAI has furnished to UVSG a copy of each of the Employee Plans
and related plan documents (including trust documents, insurance policies or
contracts, employee booklets, summary plan descriptions and other authorizing
documents, and, to the extent still in its possession, any material employee
communications relating thereto) and has, with respect to each Employee Plan
that is subject to ERISA reporting requirements, provided copies of the Form
5500, including all schedules attached thereto and actuarial reports, if any,
filed for the last three plan years. Any Employee Plan intended to be qualified
under Sections 401(a) or 501(c)(9) of the Code is in fact so qualified and
either there has been obtained from the Internal Revenue Service a favorable
determination letter as to its qualified status under applicable Code provisions
and subsequent legislation, or the time for applying to the Internal Revenue
Service for such a determination letter has not expired under applicable
Treasury Regulations. NAI has also furnished UVSG with the most recent Internal
Revenue Service determination letter issued with respect to each such Employee
Plan (and nothing has occurred since the issuance of each such letter which
could reasonably be expected to cause the loss of the tax-qualified status of
any Employee Plan subject to Section 401(a) of the Code), and all prohibited
transaction exemptions (or requests for such exemptions), private letter
rulings, opinions, information letters or compliance statements issued with
respect to any Employee Plan by the Internal Revenue Service, the Department of
Labor or the Pension Benefit Guaranty Corporation.
(e) In the case of any policies or binders of insurance that
constitute or are otherwise maintained in connection with an Employee Plan, to
NAI's knowledge (i) such policies and binders are valid and enforceable in
accordance with their terms in all respects, and are in full force and effect;
(ii) Publications is not in default in any respect with respect to any material
provisions contained in any such policy or binder and has not failed to give any
notice or present any claim under any such policy or binder in a due and timely
fashion; and (iii) Publications has not received any notice of cancellation or
non-renewal of any such policy or binder; except to the extent that a failure
with respect to any of the foregoing is not reasonably likely to have, in the
aggregate, a Publications Material Adverse Effect.
(f) Except as set forth in the NAI Disclosure Schedule, and except to
the extent that any failure with respect to the following is not reasonably
likely to have, in the aggregate, a Publications Material Adverse Effect, no
Employee Plan exists which will result in the payment of money or any other
property or rights, or accelerate or provide any other rights or benefits, to
any current or former employee of NAI (or other current or former service
provider thereto) that would not have been required but for the transactions
provided for herein and Publications is not party to any plan, program,
arrangement or understanding that would result, separately or in the aggregate,
in the payment of any "excess parachute payment" within the meaning of Section
280G of the Code, and except as disclosed in the NAI Disclosure Schedule,
Publications does not maintain any Employee Plan or Pension Plan which provides
severance benefits to current or former employees or other services providers of
NAI . Except as disclosed in the NAI Disclosure Schedule, no medical or life
insurance benefits are provided by any Employee Plan to any former employee or
independent contractor, except to the extent required by the Consolidated
Omnibus Reconciliation Act of 1985, as amended "COBRA"). Except as set forth in
the NAI Disclosure Schedule, the NAI Contributed Entities have no obligation to
contribute to retiree life, health and other benefits. Except as set forth in
the NAI Disclosure Schedule, the NAI Contributed Entities do not and have not
been a party to any collective bargaining (or other similar) agreement with
respect to any employee of the NAI Contributed Entities, nor is any such
agreement presently being negotiated.
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(g) (i) None of the Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any Person other than liabilities
which have been assumed by NAI and with respect to which none of the NAI
Contributed Entities will have any liability after the Closing Date; (ii) there
has been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any Employee Plan; (iii)
each Employee Plan has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), and the NAI Contributed Entities
have performed all obligations required to be performed by them under, are not
in any respect in default under or violation of, and have no knowledge of any
default or violation by any other party; (iv) no NAI Contributed Entity is
subject to any liability or penalty under Sections 4976 through 4980 of the Code
or Title I of ERISA with respect to any of the Employee Plans; (v) all material
contributions required to be made by the NAI Contributed Entities to any
Employee Plan have been made on or before their due dates; (vi) with respect to
each Employee Plan, no "reportable event" within the meaning of Section 4043 of
ERISA (excluding any such event for which the 30-day notice requirement has been
waived under the regulations to Section 4043 of ERISA) nor any event described
in Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) no Employee Plan
is covered by, and no NAI Contributed Entity has incurred or expects to incur
any liability under Title IV of ERISA or Section 412 of the Code, except, in the
case of any failure to comply with clauses (ii), (iii), (iv), (v), (vi) and/or
(vii) above, for such failures which are not reasonably likely to have, in the
aggregate, a Publications Material Adverse Effect. With respect to each Employee
Plan subject to ERISA as either an employee pension plan within the meaning of
Section 3(2) of ERISA or an employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, each NAI Contributed Entity has prepared in good faith
and timely filed all requisite governmental reports (which were true and correct
as of the date filed) and has properly and timely filed and distributed or
posted all notices and reports to employees required to be filed, distributed or
posted with respect to each such Employee Plan except where the failure to
timely file, distribute or post such documents would not, in the aggregate, have
a Publications Material Adverse Effect. No suit, administrative proceeding,
action or other litigation has been brought, or to the knowledge of NAI, is
threatened, against or with respect to any such Employee Plan, including any
audit or inquiry by the Internal Revenue Service or United States Department of
Labor which is reasonably likely to have, in the aggregate, a Publications
Material Adverse Effect. No NAI Contributed Entity is a party to, or has made
any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(h) With respect to each Employee Plan, each NAI Contributed Entity
has complied with (i) the applicable health care continuation and notice
provisions of COBRA and the regulations thereunder and (ii) the applicable
requirements of the Family and Medical Leave Act of 1993 and the regulations
thereunder, except to the extent that such failure to comply is not reasonably
likely to have in the aggregate, a Publications Material Adverse Effect.
(i) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not (i) entitle any current or
former employee or other service provider or any director of any NAI Contributed
Entity to severance benefits or any other similar payment (including
unemployment compensation, golden parachute, bonus or otherwise), (ii) increase
any benefits otherwise payable or (iii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee, service
provider or director except to
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the extent that any of the foregoing are not reasonably likely to have, in the
aggregate, a Publications Material Adverse Effect.
(j) There has been no amendment to, written interpretation or
announcement (whether or not written) by any NAI Contributed Entity relating to,
or change in participation or coverage under, any Employee Plan which would
materially increase the expense of maintaining such Employee Plan above the
level of expense incurred with respect to that Employee Plan for the most recent
fiscal year included in the NAI Contributed Businesses Financial Statements.
15. Contracts and Commitments. The NAI Disclosure Schedule lists all
contracts to which any NAI Contributed Entity is a party or by which it or the
NAI Contributed Businesses or their respective assets are bound that are to be
performed in whole or in part after the date hereof and that would be required
to be filed with the Securities and Exchange Commission (the "Commission") as
"material contracts" pursuant to Item 601 of Regulation S-K under the Securities
Act of 1933, as amended (the "Securities Act") if such NAI Contributed Entity
was a registrant registered under Section 12(g) of the Exchange Act of 1934, as
amended (the "Exchange Act"). The NAI Disclosure Schedule also lists (a) all
agreements, bonds, notes, debentures or similar instruments evidencing (i)
indebtedness of any NAI Contributed Entity for borrowed money or for the
deferred purchase price of any material property or service (other than trade
accounts arising in the ordinary course of business), (ii) obligations of any
NAI Contributed Entity under capital leases, (iii) guaranties by any NAI
Contributed Entity of liabilities or obligations of others, and (iv) any Liens
on the assets of any NAI Contributed Entity, (b) agreements that limit the right
of any NAI Contributed Entity to compete in any line of business; (c) agreements
which, after giving effect to the transactions contemplated hereby, purport to
restrict or bind NAI or any of its subsidiaries, other than the NAI Contributed
Entities; (d) all agreements not in the ordinary course of business pursuant to
which there is any continuing liability or obligation, including without
limitation any indemnification obligation; (e) merger, acquisition and similar
agreements that have any surviving obligations not performed in full, including
without limitation, any indemnity obligation; (f) agreements with any affiliate
of such NAI Contributed Entity; (g) any agreements not terminable on less than
75 days notice without penalty and involving amounts in excess of $6,000,000
during the 1997 fiscal year, reasonably expected during 1998, or as projected
over the remainder of the stated fixed term of the applicable agreement; and (h)
any collective bargaining or similar agreements. True and complete copies of
all agreements listed in the NAI Disclosure Schedule have been made available to
UVSG. Each of the NAI Contributed Entities has fulfilled in all material
respects, or taken all actions necessary to enable it to fulfill in all material
respects when due, its obligations under each of such agreements to which it is
a party. To the knowledge of NAI, all parties thereto other than the NAI
Contributed Entities have complied in all material respects with the provisions
thereof and no party is in breach or violation of, or in default (with or
without notice or lapse of time, or both) under such agreements which breach,
violation or default is reasonably likely to have a Publications Material
Adverse Effect. No NAI Contributed Entity has received any notice of
termination, cancellation or acceleration of any such agreement.
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16. Adequacy of Assets; Intangible Property.
(a) The businesses conducted by the NAI Contributed Entities include
all businesses engaged in by NAI and its affiliates relating to the print or
electronic program guide business whether within or outside the United States
other than the NDS Business (the "Program Guide Businesses"). The assets and
rights held by the NAI Contributed Entities include all of the assets and other
rights used or usable by NAI and its affiliates in the Program Guide Business
and the business of TVGEN and no other assets, rights, liabilities, claims or
other obligations. The assets owned or leased by the NAI Contributed Entities
are suitable and adequate for the conduct of their respective businesses and the
NAI Contributed Businesses have good and, with respect to real property owned in
fee, marketable title to or valid leasehold or other contractual interests in
all such assets that are material to the NAI Contributed Businesses as a whole,
free and clear of all Liens other than Permitted Encumbrances. For purposes of
this Agreement, "Permitted Encumbrances" means the following Liens: (i) Liens
for Taxes, assessments or other governmental charges or levies not at the time
delinquent or thereafter payable without penalty or being contested in good
faith by appropriate proceedings and for which adequate reserves shall have been
set aside on the Unaudited NAI Contributed Businesses Financial Statements in
accordance with GAAP; and (ii) Liens of carriers, warehousemen, mechanics,
materialmen and landlords incurred in the ordinary course of business for sums
not overdue or being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on the
Unaudited NAI Contributed Businesses Financial Statements.
(b) One or more of the NAI Contributed Entities owns, or is licensed
or otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and trade secrets
(collectively, "Intellectual Property") that are used in the NAI Contributed
Businesses as currently conducted, except to the extent that the failure to have
such rights has not had and is not reasonably likely to have a Publications
Material Adverse Effect. The Intellectual Property includes (i) all right, title
and interest to the name "TV Guide" in the United States, (ii) all right, title
and interest to the name "TV Guide" outside the United States, if any, held by
NAI and its affiliates, (iii) all related trademarks, service marks, trade names
or copyrights used in the conduct of the NAI Contributed Businesses and (iv) all
right, title and interest that NAI or any of its affiliates has in any
Intellectual Property of or arising out of the former EPG joint venture formerly
known as TV Guide On Screen with an affiliate of TCI. Neither NAI nor any of its
affiliates has received notice of any claim of infringement of the rights of
others with respect to any patents, trademarks, service marks, trade names or
copyrights used or owned by the NAI Contributed Entities, the loss of which is
reasonably likely to have a Publications Material Adverse Effect. Neither NAI
nor any of its affiliates has any knowledge that any of the NAI Contributed
Entities is infringing upon or otherwise violating, or has infringed upon or
otherwise violated, the rights of any third party with respect to any patent,
trademark, trade name, service mark or copyright, except to the extent that the
foregoing is not reasonably likely to have a Publications Material Adverse
Effect. No current or former employee of any NAI Contributed Entity is or was a
party to any confidentiality agreement and/or agreement not to compete which
restricts or forbids such employee's performance of any activity that such
employee was hired to perform, except to the extent that the foregoing is not
reasonably likely to have a Publications Material Adverse Effect. No NAI
Contributed Entity is currently using or has in the past used without
appropriate authorization, any confidential information or trade secrets of any
third party, except to the extent that any of the foregoing is not
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reasonably likely to have a Publications Material Adverse Effect. Since January
1, 1995, NAI has not received any notice alleging such conduct.
17. Licenses; Compliance with Regulatory Requirements.
(a) The NAI Contributed Entities hold all licenses, franchises,
ordinances, authorizations, permits, certificates, variances, exemptions,
concessions, leases, rights of way, easements, instruments, orders and
approvals, domestic or foreign ("Licenses") which are material to the ownership
of the assets that are material to the NAI Contributed Businesses (collectively,
the "Publications Licenses"). Each NAI Contributed Entity is in compliance with,
and has conducted its business so as to comply with, the terms of their
respective Publications Licenses and with all applicable laws, rules,
regulations, ordinances and codes, domestic or foreign, except where the failure
so to comply has not had and, insofar as reasonably can be foreseen, in the
future will not have, either individually or in the aggregate, a Publications
Material Adverse Effect. Without limiting the generality of the foregoing, the
NAI Contributed Entities, (i) have all Permits of Governmental Authorities
required for the operation of the facilities being operated by the NAI
Contributed Entities or required in the conduct of the NAI Contributed
Businesses, and all such Permits are identified on the NAI Disclosure Schedule,
(ii) have duly and currently filed all reports and other information required to
be filed by any Governmental Authority in connection with such Permits, and
(iii) are not in violation of any of such Permits, other than the lack of
Permits, delays in filing reports or possible violations which, in the
aggregate, have not had and are not reasonably likely to have a Publications
Material Adverse Effect.
(b) Except as set forth in the NAI Disclosure Schedule, the NAI
Contributed Entities have duly complied with, and the operation of its business,
equipment and other assets and the facilities owned or leased by any NAI
Contributed Entities are in compliance with, the provisions of all applicable
Environmental and Health Laws, except for non-compliance which is not reasonably
likely to have a Publications Material Adverse Effect. For purposes of this
Agreement, the term "Environmental and Health Laws" means any federal, state or
local law, statute, rule or regulation or the common law relating to the
environment or occupational health and safety, including any statute, regulation
or order pertaining to (i) treatment, storage, disposal, generation and
transportation of pollutants, contaminants, chemicals, industrial, toxic or
hazardous substances, oil or petroleum products or solid or hazardous waste
(collectively, "Hazardous Substances"); (ii) air, water and noise pollution;
(iii) groundwater and surface water contamination; (iv) the release into the
environment of Hazardous Substances, including without limitation emissions,
discharges, injections, spills, escapes or dumping of pollutants, contaminants
or chemicals; (v) the protection of wild life, marine sanctuaries and wetlands,
including without limitation all endangered and threatened species; (vi) storage
tanks, vessels and containers containing Hazardous Substances; (vii) underground
storage tanks, abandoned, disposed or discarded barrels and other closed
receptacles containing Hazardous Substances; (viii) health and safety of
employees; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of Hazardous Substances. As used
herein, the terms "release" and "environment" have the meanings set forth in the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended. There are no investigations, administrative proceedings, judicial
actions, orders, claims or notices that are pending, anticipated or threatened
against any NAI Contributed Entities relating to any Environmental and Health
Laws. Neither NAI nor any of its affiliates has received a notice of or knows
any facts which constitute a violation by any NAI Contributed Entities of or
give rise to
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liability of any NAI Contributed Entities under any Environmental and Health
Laws that in either case would or would be reasonably likely to have a
Publications Material Adverse Effect.
(c) The NAI Contributed Businesses and the NAI Contributed Entities
do not own, lease or operate any printing facilities or otherwise conduct any
printing activities (other than printing services provided by Persons other than
the NAI Contributed Entities using facilities and materials that are owned and
operated by Persons other than the NAI Contributed Entities).
18. Employee Matters. The NAI Disclosure Schedule lists each employment,
consulting, agency or commission agreement to which any of the NAI Contributed
Entities is a party which is not terminable without liability to the NAI
Contributed Entities upon 60 days' or less prior notice to the employee,
consultant or agent and involves compensation or remuneration of more than
$50,000 per annum. True and complete copies of such agreements have been made
available to UVSG. All of such contracts and arrangements are in full force and
effect, and neither the NAI Contributed Entities nor, to the knowledge of NAI,
any other party is in default under any of such contracts and agreements. To
the knowledge of NAI, (i) there have been no claims of defaults and (ii) there
are no facts or conditions which if continued, or on notice, will result in a
default under these contracts or arrangements. There is no pending or, to the
knowledge of NAI , threatened labor dispute, strike, or work stoppage that could
be expected to have a Publications Material Adverse Effect. Each of the NAI
Contributed Entities is in compliance in all material respects with all current
applicable laws and regulations respecting employment, discrimination in
employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, and are not engaged in any unfair
labor practice. There are no pending claims against any NAI Contributed Entities
under any workers compensation plan or policy or for long term disability. To
the knowledge of NAI, none of the employees of the NAI Contributed Businesses
are members of a labor union or similar labor organization.
19. Interested Party Transactions. The NAI Disclosure Schedule lists all
transactions between any of the NAI Contributed Entities, on the one hand, and
NAI, News Corp., any of their respective subsidiaries or any director or
executive officer of any of the foregoing, on the other hand, in which the
amount involved exceeds $60,000 that would be required to be disclosed pursuant
to Item 404 of Regulation S-K under the Securities Act or the Exchange Act if
such NAI Contributed Entity was a registrant registered under Section 12(g) of
the Exchange Act. No NAI Contributed Entity is indebted to NAI, News Corp., any
of their respective subsidiaries, or any director, officer, employee or agent of
any of the foregoing for borrowed money.
20. Insurance. The NAI Contributed Entities, through one or more affiliates,
have the benefit of policies of fire and casualty, liability and other forms of
insurance (including self insurance) in such amounts, with such deductibles and
against such risks and losses as are reasonable for the operation of the
businesses of the NAI Contributed Entities under the circumstances in which they
are being conducted. All such policies are in full force and effect, all
premiums due and payable thereon as of the date hereof, have been paid (other
than retroactive or retrospective premium adjustments that may be required to be
paid with respect to any events or circumstances arising prior to the Closing
under any of such insurance policies, which, unless accrued for in the Latest
Balance Sheet, shall accrue to or be paid by NAI), and no notice of cancellation
or termination has been received with respect to any such policy which policy
has not been replaced prior to the date of such cancellation. To the knowledge
of NAI, the activities and operations of the NAI Contributed Entities
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have been conducted in a manner so as to conform in all material respects to all
applicable provisions of such insurance policies, except for any failures so to
conform that, individually or in the aggregate, are not reasonably likely to
have a Publications Material Adverse Effect. The coverage of such policies will
cease upon the applicable Closing, but the NAI Contributed Entities will
continue to be entitled to the benefit of such policies with respect to any
covered event that occurs prior to the Closing (including during any extended
reporting period under "claims made" policies or the like).
21. Major Advertisers and Suppliers. The NAI Disclosure Schedule lists
each advertiser of the NAI Contributed Entities that individually accounted for
more than one percent (1%) of the total dollar amount of revenues of the NAI
Contributed Businesses on a combined basis in 1997, showing the total dollar
amount of revenues for each such customer during each such year. None of the NAI
Contributed Entities has received written notice from any customer in the NAI
Disclosure Schedule of such customer's intent not to remain a customer of the
NAI Contributed Entities after the Closing. The NAI Disclosure Schedule also
lists each of the ten largest vendors to the NAI Contributed Businesses (by
dollar volume) during the most recently completed fiscal year.
22. Minute Books. Except as set forth in the NAI Disclosure Schedule, NAI
has made available to UVSG true and complete copies of the minute books of the
NAI Contributed Entities. Except as set forth in the NAI Disclosure Schedule,
such minute books contain summaries of all meetings of directors and
shareholders or actions by written consent since the later of (i) January 1,
1995 and (ii) the time of the applicable entity's date of incorporation, and
such summaries are true and complete in all material respects and reflect all
transactions referred to in such minutes accurately in all material respects.
23. Brokers' and Finders' Fees. Neither NAI nor any of its controlled
affiliates has incurred, or will incur, directly or indirectly, any liability
for brokerage or finders' fees or agents' commissions or investment bankers'
fees or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
24. Year 2000 Compliance. NAI has conducted a preliminary assessment of
the possible impact of Year 2000 Issues (as hereinafter defined) on the business
and operations of Publications. NAI does not believe that the costs of required
modifications to existing programs of Publications and conversions to new
programs required in order to remediate any Year 2000 Issue are reasonably
likely to result in a Publications Material Adverse Effect. For purposes of this
section, the term "Year 2000 Issues" means issues arising from the failure or
inability of any hardware, software or systems to correctly process, provide and
receive data within and between the years 1999 and 2000 and account for all
required leap year calculations for the year 2000.
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ANNEX C - REPRESENTATIONS AND WARRANTIES OF UVSG
The representations and warranties set forth in this Annex C are made subject
to Schedule 1. Notwithstanding anything to the contrary contained in this
Agreement, references to UVSG in this Annex C shall not be deemed to include the
subsidiaries of USVG.
1. Organization. Each of UVSG and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of incorporation and has all requisite corporate power and
authority and all necessary licenses and permits to carry on its business as it
has been and is now being conducted and to own or lease and to operate the
properties used in connection therewith. Each of UVSG and its subsidiaries is
duly qualified or licensed and in good standing to do business in each of the
jurisdictions where the conduct of its business or the ownership, leasing or
operation of its properties requires such qualification or licensing, except
where the failure to be so duly qualified or licensed and in good standing,
individually or in the aggregate, would not have a material adverse effect on
the business, operations, properties or condition (financial or otherwise) of
UVSG and its subsidiaries taken as a whole or the ability of UVSG to consummate
the transactions contemplated herein (a "UVSG Material Adverse Effect").
2. Capitalization; Options and Other Rights.
(a) As of June 4, 1998, the total authorized shares of UVSG consists
of 60,000,000 shares of Class A Common Stock, $.01 par value and 30,000,000
shares of Class B Common Stock, $.01 par value (the Class A Common Stock and the
Class B Common Stock, together, the "Common Stock"), and 2,000,000 shares of
Preferred Stock, par value $.01 per share, of which 24,303,874 shares of Class A
Common Stock, 12,373,294 shares of Class B Common Stock and no shares of
Preferred Stock were issued and outstanding as of June 4, 1998. All of the
issued and outstanding shares of Common Stock have been duly and validly
authorized and issued and are fully paid and nonassessable. As of such date,
there were no other outstanding shares of capital stock or other securities or
ownership interests of UVSG other than shares of Class A Common Stock issuable
upon the exercise of options issued under UVSG's Equity Incentive Plan and its
Stock Option Plan for Non-Employee Directors (collectively, the "UVSG Stock
Option Plans") and options issued under such plans. As of December 31, 1997,
UVSG had reserved (i) 1,176,444 shares of Class A Common Stock for issuance upon
exercise of outstanding options issued pursuant to the UVSG Stock Option Plans
and (ii) 2,031,671 shares of Class A Common Stock for issuance upon exercise of
stock options available for grant under the UVSG Stock Option Plans. Other than
stock appreciation rights related to subsidiaries or divisions of UVSG that UVSG
has the option to satisfy in shares of Class A Common Stock, options outstanding
at December 31, 1997, the adoption of any employee incentive or stock option
plan subsequent to December 31, 1997 that is approved by the stockholders of
UVSG, the grant subsequent to December 31, 1997 of options pursuant to such
plans or pursuant to the UVSG Stock Option Plans, and other than this Agreement
or shares of Class B Common Stock that may be converted to shares of Class A
Common Stock, as of the date hereof there are no existing agreements,
subscriptions, options, warrants, calls, commitments, trusts (voting or
otherwise), or rights of any kind whatsoever to which UVSG is a party or by
which it is bound granting to any person any interest in or the right to
purchase or otherwise acquire from UVSG, at any time, or upon the happening of
any stated event, any capital stock of UVSG, whether or not presently issued or
outstanding, nor are there any outstanding securities of UVSG or any other
entity which are convertible into or exchangeable for shares of
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capital stock of UVSG, nor are there any agreements, subscriptions, options,
warrants, calls, commitments or rights of any kind whatsoever to which UVSG is
party or by which it is bound granting to any Person any interest in or the
right to purchase or otherwise acquire from UVSG any securities so convertible
or exchangeable.
(b) Upon consummation of the Transaction, the shares of Common Stock of
UVSG to be issued to NAI or its affiliate will have been duly and validly
authorized and issued and fully paid and nonassessable.
3. Authorization; Freedom to Contract.
(a) UVSG has all requisite corporate power, authority and legal capacity to
execute and deliver this Agreement and each other agreement, document,
instrument or certificate contemplated by this Agreement or to be executed by
UVSG, as the case may be, in connection with the consummation of the Transaction
(together with this Agreement, the "UVSG Transaction Documents"), and to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. The execution and delivery by UVSG of
this Agreement and the other UVSG Transaction Documents, the consummation of the
transactions contemplated hereby and thereby and the performance by it of its
obligations hereunder and thereunder have been duly authorized by the Board of
Directors of UVSG, and, except for the approval of the stockholders of UVSG, no
further corporate action will be necessary on the part of UVSG to authorize the
execution and delivery of this Agreement the consummation of the transactions
contemplated hereby and thereby and the performance of UVSG's obligations
hereunder and thereunder. This Agreement has been, and each of the other UVSG
Transaction Documents will be at or prior to the Closing, duly and validly
executed and delivered by UVSG. This Agreement constitutes, and each of the UVSG
Transaction Documents when so executed and delivered will constitute, legal,
valid and (assuming the due authorization, execution and delivery by the other
parties hereto and thereto) binding obligations of UVSG, enforceable against it
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(b) Except as set forth on the UVSG Disclosure Schedule, the execution and
delivery of this Agreement and the other UVSG Transaction Documents by UVSG do
not, and the performance by UVSG of its obligations hereunder and thereunder
will not, (i) violate or conflict with any provision of the Certificate of
Incorporation or By-Laws of UVSG or any of its subsidiaries or any amendments
thereto or restatements thereof, (ii) violate any of the terms, conditions or
provisions of any law, rule or regulation applicable to UVSG or any of its
subsidiaries, or any order, writ, injunction, judgment or decree of any court,
governmental authority, or regulatory agency to which UVSG or any of its
subsidiaries is subject or by which any of them or their respective assets are
bound, or (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, indenture, debenture, security
agreement, trust agreement, lien, mortgage, lease, agreement, license,
franchise, permit, guaranty, joint venture agreement, or other agreement,
instrument or obligation, oral or written, to which UVSG or any of its
subsidiaries is a party (whether as an original party or as an assignee or
successor) or by which UVSG or any of its subsidiaries or any of their
respective properties is bound,
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except for such breaches or defaults as are not reasonably likely to have a UVSG
Material Adverse Effect.
(c) Except as set forth in the disclosure schedules delivered herewith by
UVSG (collectively, the "UVSG Disclosure Schedule") and approval of the NASD, no
Permits and no Filings with any Governmental Authority are required in
connection with the execution, delivery and performance of this Agreement by
UVSG and the consummation of the transactions contemplated hereby by UVSG,
except the requirements under the HSR Act, and except where the failure to
obtain such Permits or to make such Filings is not reasonably likely to have a
UVSG Material Adverse Effect.
(d) There are no consents, authorizations or other approvals from any
Person (including, without limitation, any Person that has entered into any
contract, agreement, arrangement or understanding with UVSG or any of its
subsidiaries) required to permit the consummation of the transactions
contemplated by this Agreement, except where the failure to obtain such
consents, authorizations or approvals are not reasonably likely to have a UVSG
Material Adverse Effect.
4. Subsidiaries. Except as set forth in the UVSG Disclosure Schedule or in
the UVSG Commission Filings (as hereinafter defined), UVSG does not, directly or
indirectly, have any ownership or other interest in, or control of, any Person.
5. Charter and Organizational Documents. UVSG has previously furnished NAI
with true and complete copies of the Certificate of Incorporation and By-Laws of
UVSG.
6. Absence of Default. Except as set forth in the UVSG Disclosure Schedule or
in the UVSG Commission Filings, each of UVSG and its subsidiaries has complied
with and performed all of its obligations required to be performed under all
contracts, agreements and leases to which it is a party (whether as an original
party or as an assignee or successor) as of the date hereof, and it is not in
default in any respect under any contract, agreement, lease, undertaking,
commitment or other obligation, except for such breaches or defaults that are
not reasonably likely to have a UVSG Material Adverse Effect. UVSG has no
knowledge that any party has failed to comply in any material respect with or
perform all of its obligations required to be performed under any contract,
agreement or lease to which UVSG or any of its subsidiaries is a party or by
which any of them is bound or any of their respective assets is subject (whether
as an original party or an assignee or successor) as of the date hereof.
7. Absence of Certain Developments. Since the date of the latest balance
sheet (the "UVSG Latest Balance Sheet") included in the UVSG Commission Filings,
the business of UVSG and its subsidiaries has been conducted in the ordinary
course of business consistent with past practice, and, except to the extent
reflected or otherwise disclosed in the UVSG Disclosure Schedule, there has not
been:
(a) any material adverse change in the business, assets, results of
operation or condition (financial or otherwise) of UVSG and its subsidiaries
(without regard to changes resulting from macroeconomic or general industry
conditions) (a "UVSG Material Adverse Change"), and there has not occurred any
event which is reasonably likely to result in a UVSG Material Adverse Change;
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(b) any sale, lease or other transfer or disposition of any material asset
of UVSG or its subsidiaries;
(c) any declaration, setting aside, or payment of any stock dividend or
distribution (other than of cash) to TCI or any of its affiliates, or any direct
or indirect redemption, retirement, purchase or other acquisition by UVSG of any
of its capital stock or other securities or options, warrants or other rights to
acquire capital stock;
(d) any change in accounting methods, practices or policies (including any
change in depreciation or amortization policies or rates) by any of UVSG and its
subsidiaries or any revaluation by UVSG or any of its subsidiaries of any of
their respective assets;
(e) any material modification or change to any material contract by UVSG or
any of its subsidiaries, other than in the ordinary course of business;
(f) any written waiver or written release of any right or claim of
substantial value by UVSG or any of its subsidiaries;
(g) any payment, discharge or satisfaction of any material claim, liability
or obligation by UVSG or any of its subsidiaries, other than the payment,
discharge or satisfaction in the ordinary course of business and consistent with
past practice of liabilities reflected or reserved against in its Latest Balance
Sheet or incurred since the date of such balance sheet in the ordinary course of
business and consistent with past practice and other than scheduled repayments
of indebtedness reflected on the Latest Balance Sheet;
(h) any issuance or sale of capital stock or other securities or membership
or other ownership interests, exchangeable or convertible securities, options,
warrants, puts, calls or other rights to acquire capital stock or other
securities or other ownership interests of UVSG;
(i) any delay in the payment of any trade or other payables other than in
the ordinary course of business and consistent with past practice; or
(j) any agreement by UVSG or any of its affiliates to do any of the
foregoing.
8. Liabilities. Except as reflected in the UVSG Commission Filings or the
UVSG Disclosure Schedule and except for liabilities or obligations that fall
within any of the exceptions contained in any of the other representations or
warranties contained in this Annex C (e.g., knowledge, materiality and disclosed
liabilities) or that arose in the ordinary course of business after March 31,
1998 (and which have not resulted in a UVSG Material Adverse Change), neither
UVSG nor any of its subsidiaries has actual or potential liability or obligation
of any kind or nature, whether due or to become due, whether absolute, accrued,
fixed or contingent or otherwise.
9. Litigation.
(a) Except as set forth in the UVSG Commission Filings or the UVSG
Disclosure Schedule: (i) there are no private or governmental Legal Proceedings
pending or, to UVSG's knowledge, threatened against UVSG or any of its
subsidiaries; and (ii) none of UVSG or any of its
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subsidiaries or any of their respective assets, properties or business, is
subject to any judgment, writ, injunction or decree of any Governmental
Authority or arbitration tribunal; except in either case for such Legal
Proceedings as are not reasonably likely to have a UVSG Material Adverse Effect.
(b) Neither UVSG nor any of its subsidiaries is a party to any Legal
Proceedings pending or, to its knowledge, threatened which, if adversely
determined, would adversely affect or restrict the ability of UVSG to consummate
the transactions contemplated by this Agreement or to perform its obligations
hereunder.
(c) There is no judgment, order, injunction or decree of any governmental
authority or regulatory agency to which UVSG or any of its affiliates is subject
which might adversely affect or restrict the ability of UVSG or any of its
affiliates to consummate the transactions contemplated by this Agreement or to
perform its obligations hereunder.
10. Restrictions on Business Activities. Except as set forth in the UVSG
Commission Filings or the UVSG Disclosure Schedule, there is no material
agreement, nor is there any judgment, injunction, order or decree, binding upon
UVSG or any of its affiliates which has or could have the effect of prohibiting
or materially impairing any current business practice of UVSG as currently
conducted (including following the consummation of the transactions contemplated
by this Agreement).
11. Compliance with Law. Except as set forth in the UVSG Commission Filings
or the UVSG Disclosure Schedule, UVSG and its affiliates (i) are in compliance
with all federal, state, local or foreign laws (including common law), statutes,
codes, ordinances, rules, regulations or other requirements applicable to UVSG
or to the conduct of its business or operations or the use of its properties
(including any leased properties) and assets and (ii) have all governmental
permits and approvals from Governmental Authorities which are required by UVSG
to operate its business, except in such cases where the failure to comply or
obtain is not reasonably likely to have a UVSG Material Adverse Effect.
12. Taxes. Except as otherwise set forth in the UVSG Disclosure Schedule:
(a) Each of UVSG and its subsidiaries has filed all material Tax Returns
that it was required to file. All such Tax Returns are correct and complete in
all material respects. All material Taxes owed by UVSG and its subsidiaries
(whether or not shown on any Tax Return) have been paid. There are no liens for
material Taxes (other than for current Taxes not yet due and payable or for
items being contested in good faith and for which there are adequate reserves in
accordance with GAAP on the books of the applicable entity) on any of the assets
of UVSG and its subsidiaries.
(b) Each of UVSG and its subsidiaries has withheld and paid all material
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor or other third party.
(c) No material deficiencies for any Taxes have been proposed, asserted or
assessed against UVSG or any of its subsidiaries that are not adequately
reserved for in accordance with GAAP in all cases applied in a consistent basis
with the UVSG Latest Balance Sheet. The
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UVSG Disclosure Schedule indicates the Tax Returns of UVSG or its subsidiaries
that currently are the subject of an audit.
(d) None of UVSG and its subsidiaries has any current non-contingent
liability for the Taxes of any Person (other than UVSG and its subsidiaries)
under Treasury Regulations Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
(e) If the income of UVSG or any of its subsidiaries was required under
federal, state, local, or foreign tax rules, to be included on a consolidated,
unitary, combined or other such Tax Return filed by an entity other than any of
UVSG or its subsidiaries, each such group has filed all Tax Returns that it was
required to file with respect to UVSG or its subsidiaries for each period during
which UVSG or any of its subsidiaries was a member of such Group. All such Tax
Returns were correct and complete in all material respects in so far as they
relate to UVSG and its subsidiaries. All material Taxes owed by such group with
respect to UVSG and its subsidiaries (whether or not shown on a Tax Return) have
been paid for each taxable period during which UVSG and any of its subsidiaries
was a member of its respective group.
(f) The normal period within which to examine and/or assess Taxes on the
income of UVSG or its subsidiaries has not been extended with respect to any
such entity by waiver of, or agreement to extend, the applicable statute of
limitations or otherwise with the exception of the extensions of the statute of
limitations agreed to with the State of New York for UVSG's 1993 and 1994 income
Tax Returns through December 31, 1998.
(g) None of UVSG and its subsidiaries has made or is required to make any
payments, or is a party to any agreement that under certain circumstances could
obligate it to make any payment that will not be deductible under Code Section
280G.
(h) UVSG and its subsidiaries are not a party to any tax sharing or
allocation agreement with any third party.
13. Contracts and Commitments. The UVSG Commission Filings and the UVSG
Disclosure Schedule list all contracts to which UVSG or any of its subsidiaries
is a party or by which any of them or their respective businesses or assets are
bound that are to be performed in whole or in part after the date hereof and
that would be required to be filed with the Commission as "material contracts"
pursuant to Item 601 of Regulation S-K of the Securities Act if UVSG was a
registrant registered under Section 12(g) of the Exchange Act. The UVSG
Commission Filings and/or the UVSG Disclosure Schedule also list agreements that
limit the right of UVSG or any of its subsidiaries to compete in any line of
business. True and complete copies of all agreements listed in the UVSG
Commission Filings and the UVSG Disclosure Schedule have been made available to
NAI. Each of UVSG and its subsidiaries has fulfilled in all material respects,
or taken all actions necessary to enable it to fulfill in all material respects
when due, its obligations under each of such agreements to which it is a party.
To the knowledge of UVSG, except as set forth in the UVSG Disclosure Schedule,
all parties thereto other than UVSG or its subsidiaries have complied in all
material respects with the provisions thereof and no party is in breach or
violation of, or in default (with or without notice or lapse of time, or both)
under such agreements which breach, violation or default is reasonably likely to
have a UVSG Material Adverse Effect. None of UVSG and its
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subsidiaries has received any notice of termination, cancellation or
acceleration of any such agreement.
14. Intangible Property. Except as set forth in the UVSG Commission Filings
or the UVSG Disclosure Schedule, and except for the TV Guide On-Screen
Intellectual Property, one or more of UVSG and its subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use, all
Intellectual Property that is used in the business of UVSG and its subsidiaries
as currently conducted, except to the extent that the failure to have such
rights has not had and is not reasonably likely to have a UVSG Material Adverse
Effect. Except as set forth in the UVSG Commission Filings or the UVSG
Disclosure Schedule, (i) neither UVSG nor any of its controlled affiliates has
received notice of any claim of infringement of the rights of others with
respect to any patents, trademarks, service marks, trade names or copyrights
used or owned by UVSG; (ii) neither UVSG nor any of its controlled affiliates
has any knowledge that UVSG or any of its controlled affiliates is infringing
upon or otherwise violating, or has infringed upon or otherwise violated, the
rights of any third party with respect to any patent, trademark, trade name,
service mark or copyright; no current or former employee of UVSG or any of its
controlled affiliates is or was a party to any confidentiality agreement and/or
agreement not to compete which restricts or forbids such employee's performance
of any activity that such employee was hired to perform; and (iv) none of UVSG
and its controlled affiliates is currently using or has in the past used without
appropriate authorization, any confidential information or trade secrets of any
third party; except to the extent that any of the foregoing is not reasonably
likely to have a UVSG Material Adverse Effect. Since January 1, 1995, neither
UVSG nor any of its controlled affiliates has received any notice alleging such
conduct.
15. Licenses; Compliance with Regulatory Requirements.
(a) Except as set forth in the UVSG Commission Filings or the UVSG
Disclosure Schedule, UVSG and its subsidiaries hold all Licenses which are
material to the ownership of the assets that are material to UVSG and its
subsidiaries (collectively, the "UVSG Licenses"). Except as set forth in the
UVSG Commission Filings or the UVSG Disclosure Schedule, each of UVSG and its
subsidiaries is in compliance with, and has conducted its respective business so
as to comply with, the terms of the UVSG Licenses and with all applicable laws,
rules, regulations, ordinances and codes, domestic or foreign, except where the
failure so to comply has not had and, is not reasonably likely to have, either
individually or in the aggregate, a UVSG Material Adverse Effect. Without
limiting the generality of the foregoing, UVSG and its subsidiaries (i) have all
Permits of Governmental Authorities required for the operation of the facilities
being operated by UVSG in the conduct of its business, and all such Permits are
identified on the UVSG Commission Filings or the UVSG Disclosure Schedule, (ii)
have duly and currently filed all reports and other information required to be
filed by any Governmental Authority in connection with such Permits, and (iii)
are not in violation of any of such Permits, other than the lack of Permits,
delays in filing reports or possible violations which, in the aggregate, have
not had and are not reasonably likely to have a UVSG Material Adverse Effect.
(b) Except as set forth in the UVSG Commission Filings or the UVSG
Disclosure Schedule, each of UVSG and its subsidiaries has duly complied with,
and the operation of its business, equipment and other assets and the facilities
owned or leased by it are in compliance with, the provisions of all applicable
Environmental and Health Laws, except for non-compliance which
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is not reasonably likely to have a UVSG Material Adverse Effect. Except as set
forth in the UVSG Commission Filings or the UVSG Disclosure Schedule, there are
no investigations, administrative proceedings, judicial actions, orders, claims
or notices that are pending, anticipated or threatened against UVSG or its
subsidiaries relating to any Environmental and Health Laws. Except as set forth
in the UVSG Commission Filings or the UVSG Disclosure Schedule, neither UVSG nor
any of its subsidiaries has received a notice of or knows any facts which
constitute a violation by UVSG of or gives rise to liability of UVSG under any
Environmental and Health Laws that in either case would or would be reasonably
likely to have a UVSG Material Adverse Effect.
16. Interested Party Transactions. Except to the extent reflected in the
UVSG Commission Filings, the UVSG Disclosure Schedule lists or describes all
transactions between UVSG or any of its subsidiaries, on the one hand, and TCI
or any of its subsidiaries or any director or executive officer of any of the
foregoing, on the other hand, in which the amount involved exceeds $60,000 that
would be required to be disclosed pursuant to Item 404 of Regulation S-K under
the Securities Act or the Exchange Act if UVSG was a registrant registered under
Section 12(g) of the Exchange Act. Neither UVSG nor any of its subsidiaries is
indebted to TCI, any of its subsidiaries, or any director, officer, employee or
agent of any of the foregoing for borrowed money.
17. Minute Books. Except as set forth in the UVSG Disclosure Schedule, UVSG
has made available to NAI true and complete copies of the minute books of UVSG
and its subsidiaries. Except as set forth in the UVSG Disclosure Schedule, such
minute books contain summaries of all meetings of directors and shareholders or
actions by written consent since the later of (i) January 1, 1995 and (ii) the
time of the applicable entity's date of incorporation, and such summaries are
true and complete in all material respects and reflect all transactions referred
to in such minutes accurately in all material respects.
18. Brokers' and Finders' Fees. Other than with respect to Merrill Lynch &
Co. (the fees of which shall be paid by UVSG), neither UVSG nor any of its
controlled affiliates has incurred, or will incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
19. SEC Filings; Financial Statements.
(a) UVSG has filed all forms, reports and documents required to be filed
by it with the Commission since January 1, 1994, and has heretofore made
available to NAI, in the form filed with the Commission (i) its Annual Reports
on Form 10-K for the fiscal years ended December 31, 1995, 1996 and 1997 (the
"1997 Form 10-K"), respectively, and the Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1998 (the "March 31, 1998 Form 10-Q"), (ii) all
proxy and information statements relating to meetings of UVSG's stockholders
since January 1, 1995, (iii) all other reports and registration statements filed
with the Commission since January 1, 1997 (the "1997 Additional Filings"and
together with the 1997 Form 10-K, the March 31, 1998 Form 10-Q and all proxy and
information statements relating to meetings of UVSG's stockholders since January
1, 1997, the "UVSG Commission Filings"). The UVSG Commission Filings and all
other forms, reports and other documents filed by UVSG with the Commission after
the date hereof but prior to the Closing Date (x) were prepared, or will be
prepared, in accordance with the Securities Act, or the Exchange Act, as the
case may be, and (y) did not at the time they were filed, and will not at the
time
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they are filed, with the Commission contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made therein, in the light of the circumstances in which they were made, not
misleading.
(b) Each of the consolidated financial statements (including the notes
thereto) contained in the UVSG Commission Filings was prepared in accordance
with GAAP and Regulation S-X and fairly presents the consolidated financial
position, results of operations and cash flows of UVSG and its consolidated
subsidiaries as at the respective dates thereof and for the respective periods
indicated therein subject in the case of unaudited interim financial statements
to normal recurring year-end audit adjustments.
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ANNEX D - TAX MATTERS
For purposes of this Annex D - Tax Matters the term "NAI Contributed Entities"
shall not include TVSM except with respect to periods TVSM was owned by NAI or
its affiliates.
1. Tax Returns. To the extent requested by UVSG, NAI has made available or
will make available (or, in the case of Tax Returns filed after the Closing
Date, will make available) to UVSG all portions of Tax Returns, and any
amendments thereto, filed by or on behalf of the NAI Contributed Entities (or
with respect to their assets or businesses) for all taxable years or applicable
periods ending on or prior to the Closing Date, in each case, to the extent such
Tax Returns are reasonably relevant in the preparation by or on behalf of the
NAI Contributed Entities of Tax Returns subsequent to the Closing Date.
2. Termination of Prior Tax Settlement Agreements. Except as otherwise
provided in this letter agreement, all tax settlement and tax-sharing
agreements, arrangements, policies and guidelines, formal or informal, express
or implied, that may exist between the NAI Contributed Entities and any
affiliate ("Settlement Agreements") and all obligations thereunder shall
terminate prior to the Closing, and after the Closing Date, none of the NAI
Contributed Entities shall be bound by such Settlement Agreements or have any
liability thereunder.
3. Pre-Closing Taxes.
(a) Each of the NAI Contributed Entities shall continue to be included for
all taxable periods (or portions thereof) ending on or before the Closing Date
in the consolidated Federal income Tax Return and any required state or local
consolidated or combined income or franchise Tax Returns of any affiliated group
of which any of them is a member (each of which is herein referred to as a
"Selling Affiliated Group") which Tax Returns include any of the NAI Contributed
Entities (all such Tax Returns including taxable periods (or portions thereof)
of the NAI Contributed Entities ending on or before the Closing Date are
hereinafter referred to, collectively, as "Pre-Closing Consolidated Returns").
NAI shall cause its Selling Affiliated Groups to timely prepare and file (or
cause to be prepared and filed) all Pre-Closing Consolidated Returns and shall
timely pay all Taxes shown as due and payable on Pre-Closing Consolidated
Returns (including any Taxes with respect to any deferred income triggered into
income by Treasury Regulations (S) 1.1502-13 and Treasury Regulations (S)
1.1502-14 and any excess loss accounts taken into income under Treasury
Regulations (S) 1.1502-19).
(b) NAI shall timely prepare (or cause to be so prepared) all other Tax
Returns of the NAI Contributed Entities which it formerly owned or controlled,
that are required by law for all taxable periods ending on or before the Closing
Date ("Pre-Closing Non-Consolidated Returns"). All Pre-Closing Non-Consolidated
Returns shall be prepared in a manner consistent with prior practice and shall
properly include and reflect the income, activities, operations and transactions
of the NAI Contributed Entities, as applicable. NAI shall timely file (or cause
to be so filed) all Pre-Closing Non-Consolidated Returns which are due on or
before the Closing Date and shall pay (or cause the NAI Contributed Entities to
pay as each may be liable) all Taxes due thereon. NAI shall also pay (or cause
the NAI Contributed Entities to pay as each may be liable) the full amount of
any
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Tax which is payable by the NAI Contributed Entities without the filing of a Tax
Return ("Non-Return Taxes"), payment of which is due on or before the Closing
Date. With respect to each Pre-Closing Non-Consolidated Return due after the
Closing Date, NAI shall deliver (or cause to be so delivered) each such Pre-
Closing Non-Consolidated Return to UVSG at least 15 days prior to the due date
of such Tax Return, together with a payment in an amount equal to the amount of
Tax shown as due and payable on such Pre-Closing Non-Consolidated Return (after
giving effect to any credits for the amount of Tax, if any, paid on or prior to
the Closing Date as shown on such Tax Return). Subject to the foregoing, UVSG
shall cause the NAI Contributed Entities to file all such Pre-Closing Non-
Consolidated Returns that are due after the Closing Date and to pay the amount
of Tax shown as due and payable thereon (after giving effect to any credits for
the amount of Tax, if any, previously paid as shown on such Tax Return).
4. Transfer Taxes. All sales, use, transfer, stamp, value added, duty,
excise, stock transfer, real property transfer, recording, gains and other
similar taxes and fees arising out of or in connection with the transactions
contemplated by this Agreement shall be paid 50% by UVSG and 50% by NAI .
5. Post-Closing Taxes. UVSG shall timely prepare and file (or cause to be so
prepared and filed) all Tax Returns required by law for all Taxes, covering
solely the NAI Contributed Entities, for taxable periods ending after the
Closing Date ("Post-Closing Returns"). UVSG shall timely pay or cause to be
paid all Taxes relating to Post-Closing Returns ("Post-Closing Taxes"). NAI
shall reimburse UVSG for (i) the amount of Post-Closing Taxes reported as
payable on each Post-Closing Return that is attributable to the portion of the
period covered by such Tax Return ending on the close of business on the Closing
Date (the "Pre-Closing Tax Period"), determined by treating the close of
business on the Closing Date as the last date of the taxable period, and (ii)
the amount of any Non-Return Tax payable after the Closing Date that is
attributable to the portion of the period covered by such payment which ends on
or before the close of business on the Closing Date (pro rata based upon the
number of days covered by such payment or if relevant as determined under clause
(i)), in each case after giving effect to any credits for the amount of such
Post-Closing Tax or such Non-Return Tax, if any, paid on or prior to the Closing
Date by NAI, the NAI Contributed Entities or any of their predecessors or
affiliates. Such reimbursements shall be made on or before the later of the
date on which such return is filed or 15 days after receipt of a copy of such
return or evidence of such payment and UVSG shall provide NAI with copies of
workpapers which will permit NAI to review and substantiate the accuracy of such
return or such payment.
6. Tax Cooperation. After the Closing Date, NAI shall submit (or cause to be
submitted) to UVSG blank Tax Return workpaper packages. UVSG shall cause the
NAI Contributed Entities to prepare completely and accurately all information
that NAI shall reasonably request in such workpaper packages and shall submit to
NAI such packages within the later of 90 calendar days after UVSG's receipt
thereof or 90 calendar days after the close of the taxable period to which a
workpaper package relates. The parties shall cooperate with each other in
connection with any Tax investigation, audit or other proceeding. UVSG shall
preserve all information, returns, books, records and documents relating to any
liabilities for Taxes with respect to a taxable period until the later of the
expiration of all applicable statutes of limitation and extensions thereof, or a
final determination with respect to Taxes for such period.
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7. Notification of Proceedings, Control; Refunds.
(a) In the event that UVSG or any of the NAI Contributed Entities receive
notice, whether orally or in writing, of any pending or threatened United States
Federal, state, local, municipal or foreign tax examinations, claims,
settlements, proposed adjustments, assessments or reassessments or related
matters with respect to Taxes that could affect NAI or its Subsidiaries (or the
NAI Contributed Entities with respect to taxable periods or portions thereof
ending on or before the Closing Date), or if NAI or any of its Subsidiaries
receive notice of any such tax matter that could affect UVSG (or any of the NAI
Contributed Entities), the party receiving notice shall notify in writing the
potentially affected party within 10 calendar days thereof. The failure of any
party to give the notice required by this Section 7.7(a) shall not impair that
party's rights under this Agreement except to the extent that the other party
demonstrates that it has been damaged thereby.
(b) Each of NAI and UVSG shall have the right to control any audit or
examination by any taxing authority, initiate any claim for refund, file any
amended return, contest, resolve and defend against any assessment, notice of
deficiency or other adjustment or proposed adjustment relating or with respect
to any Taxes, the ultimate liability for which is the responsibility of that
party or its affiliates under this Agreement, and each of NAI and UVSG shall be
entitled to, and to the extent received by the other shall be promptly paid by
the other, all refunds with respect to any such Taxes. NAI and UVSG shall
jointly control, defend and resolve any tax matter as to which they are both
liable (in whole or in part).
8. Indemnification.
(a) After the Closing Date, NAI shall indemnify and hold harmless UVSG,
the NAI Contributed Entities and each of their respective successors and assigns
from and against any Tax liability of the NAI Contributed Entities with respect
to the period ending on or before the Closing Date on any Pre-Closing Non-
Consolidated Return or on a Post-Closing Return (determined by treating the
Closing Date as the last date of the taxable period) and with respect to any
Non-Return Taxes attributable to the portion of the period covered by any
payment of such Taxes which ends on or before the Closing Date, in each case, to
the extent such amount exceeds (i) any amount previously paid to UVSG with
respect to such Tax pursuant to Section 1.3 or 1.5, as applicable, and (ii) the
$3,500,000 of reserves for such taxes on the Latest Balance Sheet. NAI shall pay
such amounts as it is obligated to pay to UVSG within 10 calendar days after
payment of any applicable Tax liability by UVSG and to the extent not paid by
NAI within such 10-day period, the amount due shall thereafter include interest
thereon at a rate per annum equal to the prime rate as publicly announced from
time to time by The Bank of New York (the "Overpayment Rate"), adjusted as and
when changes to such Overpayment Rate shall occur, compounded semi-annually. NAI
shall indemnify and hold harmless UVSG, the NAI Contributed Entities and each of
their respective affiliates, successors and assigns, from and against (i) any
Tax liability for periods prior to and including the Closing Date resulting from
the NAI Contributed Entities being severally liable for any Taxes of any
consolidated group of which the NAI Contributed Entities are or were a member
pursuant to Treasury Regulations (S) 1.1502-6 or any analogous state or local
tax provision (including, without limitation, any Tax liability with respect to
any Pre-Closing Consolidated Return), and (ii) any Tax liability resulting from
the NAI Contributed Entities ceasing to be a member of any Selling Affiliated
Group filing consolidated or combined Tax Returns.
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(b) After the Closing Date, UVSG and each of the NAI Contributed Entities,
jointly and severally shall indemnify and hold harmless NAI and its affiliates,
successors and assigns from and against any Tax liability with respect to the
taxable period or portion thereof beginning after the Closing Date. UVSG shall
hold NAI harmless and be liable and pay for any and all Taxes not incurred in
the ordinary course of business attributable to the acts or omissions of UVSG,
its affiliates or the NAI Contributed Entities occurring after the Closing but
on the Closing Date other than acts specifically contemplated by this document.
UVSG shall cause the appropriate NAI Contributed Entity or Subsidiary of an NAI
Contributed Entity to pay such amounts within 10 calendar days after payment of
any such Tax liability by NAI and, to the extent not paid by such NAI
Contributed Entity or Subsidiary within such 10-day period, the amount due shall
thereafter include interest thereon at the Overpayment Rate, compounded semi-
annually.
(c) To the extent permitted by law, the parties agree to treat indemnity
payments under this letter agreement as adjustments to the consideration paid
for the NAI Contributed Entities.
9. UVSG shall take any reasonable actions and cause Publications to take any
reasonable actions requested by NAI to permit NAI to elect to reattribute losses
of Publications pursuant to Treasury Regulations (S) 1.1502-20(g).
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1. Calculated as current assets minus current liabilities (exclusive of
liabilities to be retained or assumed hereunder by NAI or an affiliate thereof
other than the NAI Contributed Entities) determined on a basis consistent with
the March 29, 1998 balance sheet.
2. Assumes acquisition by Liberty of 6,375,000 shares of Class B Common Stock
of UVSG in the Netlink Transaction. In the event such transaction is not
consummated, the number of shares of Class B Common Stock to be issued to NAI
will be reduced on a share for share basis (with a corresponding increase in the
number of shares of Class A Common Stock).
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